The UK housing market continued to display a lack of momentum in December, with buyer interest edging lower, according to the latest UK Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS). The report also highlights that the recent Stamp Duty change is having little immediate effect.
In December, activity in the UK housing market continued to drop. After new buyer enquiries came close to stabilising in November, 15% more respondents to the RICS survey noted a decline in demand (as opposed to a rise) in the month of December.
Stamp Duty change
Furthermore, when contributors were asked whether they have witnessed an increase in first time buyer enquiries following the Stamp Duty change in the Autumn Budget, an overwhelming majority (86%) across the UK said that they hadn’t.
While this could be in part due to the time of year, respondents were also asked to consider the likely impact on the market over the coming months. Nationally, the majority of contributors (66%) anticipated the change having little consequence, while 12% felt it would result in higher overall activity. In London, however, 48% envisaged not much response, but a higher proportion of respondents compared to the national figure (28%) did say that the Stamp Duty change would increase overall market activity. The results for the wider South East are closer to the national picture.
Agreed sales
Stamp Duty Change to have Limited Impact on New Buyer Interest
Agreed transactions also fell at the national level, with 13% more respondents reporting a decline in volumes over the month. Significantly, Scotland, Northern Ireland and the North East were the only areas to suggest stronger sales, whereas transaction trends were either flat or negative across the rest of the UK.
Sales expectations nationally remain flat over the coming three months, but contributors are more optimistic over the year to come, with activity anticipated to pick up across all regions/countries over the next 12 months, with London recording its first positive reading since last June.
Looking at supply, new instructions continued to drop nationally, extending a run of 23 months. Comments from respondents continue to emphasise the adverse impact this is having on the market. There is, however, a possible improvement on the horizon, with 23% of contributors noting that appraisals were higher this December than last (compared to 15% of respondents in November).
Growing house prices
Looking at house prices, the headline balance moved to +8% in December, following a reading of zero in November. As such, this measure is now consistent with a marginal increase in prices nationally (on the most closely followed indices) over the coming months. The three-month price expectations series, however, remains negative at the national level, highlighting a lack of conviction surrounding the near-term outlook.
Property to let
In the lettings market, tenant demand continued to fall during December (on a non-seasonally adjusted basis), albeit the pace of decline eased somewhat from the previous report. Meanwhile, new landlord instructions dropped at a slightly faster rate. As a result, rental growth expectations were modestly positive for the three months ahead (net balance moving to +9% from +4%).
The Chief Economist at the RICS, Simon Rubinsohn, comments: “The initial feedback from the market doesn’t suggest that the change in the Stamp Duty regime announced in the Budget is going to have a material impact on activity. Indeed, the risk was always that a good portion of the benefit would be capitalised in the price, therefore limiting the benefit for the first time buyer.
“Meanwhile, the latest RICS data continues to highlight the importance of disaggregating the headline numbers when talking about the market. Challenges over affordability may have grown across the UK, but they are clearly having a bigger impact in some parts of the country than others. This is clearly evident in the sales expectations figures, which still remain in positive territory in more than half of the areas surveyed in the report.”
Simon Heawood, the CEO and Founder of property investment platform Bricklane.com, also responds to the survey: “Abolishing Stamp Duty was a drop in the ocean, given the affordability challenge of getting generation rent onto the property ladder. Increasing supply of the right kinds of housing will also go some way to stopping ever-rising house prices, but many of generation rent still face the prospect of waiting many years to buy their own home.
“The focus on bridging the housing generational gap must lie on the all-important first rung of the ladder – saving up for a deposit. The issue of housing supply and price is important, but looking at measures to support generation rent’s ability to get together a deposit is crucial.”
He continues: “The current situation will mean a continued reliance on the private rental sector, so it’s welcome news that the Government will be opening a consultation on how to encourage landlords to offer longer tenancies. Some forward-thinking landlords have been offering more stable tenancies for a while now and it is a great win-win – tenants get greater stability, enabling them to feel more at home, whilst investors have the benefit of higher occupancy rates.”