Seasonal slowdown, Brexit and a general election haunt the housing market
RICS UK Residential Market Survey, October 2019
- New buyer enquiries, sales and new instructions (supply) still downbeat
- Prices broadly flat at the headline level for a third straight report
- Tenant demand rises again as landlords continue to exit the sector
The October 2019 RICS UK Residential Market Survey continues to show a subdued sales market, with negative readings covering new buyer enquiries, agreed sales and new instructions. Near term expectations for sales over the next three months have improved a little, and a stable trend is now anticipated. Potentially indicating a change post election.
Across the UK as a whole, enquiries from new buyers fell for the second month in succession, with a net balance of -16% of respondents citing a decline. Alongside this, newly agreed sales continued to slip. Looking at the different areas of the UK, sales dipped across virtually all parts apart from Northern Ireland, where contributors noted a marginal increase.
Looking ahead, as the three month sales outlook turned less pessimistic, twelve-month expectations also improved, posting the highest reading in nine months (net balance +23%).
As the UK continues to struggle with housing supply, respondents noted that new instructions fell for the fourth consecutive month (at the national level). This decline was reflected across the whole of the UK. In addition, at -49%, the net balance of survey participants reporting an annual decline in the level of market appraisals undertaken was the most negative since this series began in 2017.
Moving to prices, the national indicator on house price inflation posted a broadly flat net balance of -5%, little changed from -3% previously. Regarding the outlook, current conditions could place marginally downward pressure on headline house prices at the national level in the near term. Over the next 12 months however, prices are expected to increase. Northern Ireland, Wales, Scotland and the north west of England display the strongest expectations for house price growth over the coming year.
In the lettings market, the quarterly (seasonally adjusted) figures on tenant demand point to another rise in the three months to October.
Indeed, the net balance picked up to +22%, the firmest reading since the end of 2016. At the same time, new landlord instructions declined once again, as the pace of decline seemingly gathered momentum over the quarter (in net balance terms). On the back of this, rental growth expectations for the near term strengthened further, with every UK region/country projected to see an increase in rents over the coming three months.
Simon Rubinsohn, RICS chief economist, said: “The latest survey feedback continues to suggest that both buyer and seller activity remains in a holding pattern, hampered by political and economic uncertainty. Given the upcoming general election next month, it appears unlikely that these trends will pick-up to any meaningful extent over the remainder of this year.
“The picture remains very different on the lettings side however, with tenant demand gathering momentum over recent months. This is running against an increasingly tight supply backdrop for rental properties and seems set to squeeze the pace of rental growth higher going forward.”
Tamara Hooper, policy manager at RICS added: “Persistent government meddling in the private rented sector (PRS) has dampened landlords’ appetites to invest and expand their portfolios, with many consolidating their assets, or leaving the sector altogether. In addition, the regular changes to the PRS regime has decreased stability and standards for tenants.
“The government needs to stop tinkering with PRS activity – through misguided eviction processes, taxation and fees – and help provide a careful balance between landlords and tenants’ rights. This will encourage more landlords back to the market as well as ensure that tenants, including those who are most vulnerable, are not at a disadvantage in being able to find a suitable and affordable home to rent.”