The latest UK Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS), covering the month of September, points towards a more cautious property sales outlook.
The results of the study also show a slight weakening in new buyer demand for the second consecutive report.
Respondents continue to cite the mixture of affordability constraints, a lack of housing stock, economic uncertainty and interest rate rises to be holding back activity to a certain degree. What’s more, forward-looking indicators have now turned a little more pessimistic with regards to the property sales outlook.
Starting with new buyer demand, the enquiries gauge slipped again during September, with the net balance coming in at -11%, compared to -9% in August. Having remained relatively stable over the four months prior to this, recent results appear to be pointing to a renewed decline in new buyer enquiries.
At the same time, the volume of new sales instructions coming to the market also dropped for a second consecutive month. Unsurprisingly, this leaves average stock levels on estate agents’ books close to record low levels, with limited choice likely to be one factor hampering demand.
Furthermore, survey participants continue to report that the level of appraisals being undertaken remains down annually, with the net balance sitting at -20%. As such, there is nothing from this indicator to suggest a pick-up in sales listings is imminent.
In another sign of a market struggling for momentum, the average time taken to complete a sale, from its initial listing, has increased to around 19 weeks. This represents the longest duration since the series was introduced in February 2017.
In terms of sales volumes, the newly agreed sales net balance remained slightly negative across the UK, moving from -13% to -9% month-on-month.
RICS Report Indicates that the Property Sales Outlook has Turned More Cautious
The regional breakdown from the RICS shows a flat to slightly negative sales trend in virtually all parts of the country. Northern Ireland and Wales were the only regions to have seen a rise in sales during September. Even so, this growth was relatively modest.
As to the future, near-term sales expectations slipped for a fourth consecutive month nationally, with the net balance coming in at -16%. Further forward, over the next 12 months, sales expectations have now also turned negative UK-wide. Again, respondents in Northern Ireland remained most optimistic with regards to the property sales outlook, while, at the other end of the spectrum, those in the South East are now the most cautious.
The headline price net balance inched down to -2% in September’s results, compared with 1% in August. Consequently, house prices have remained more or less unchanged nationally in each of the past five months. That said, with a lack of affordability in parts of the country remaining a key challenge, the subdued sales picture in these areas is still placing downward pressure on prices.
Indeed, while respondents in London continue to report the steepest fall in house prices on a regional comparison, the already negative readings for the South East and East Anglia deteriorated a little further in September.
Elsewhere, however, house prices continue to rise firmly, with the West Midlands, Northern Ireland and Scotland posting the strongest growth. Going forward, respondents in almost all areas, with the exception of London and the South East, are anticipating that prices will drift higher over the coming 12 months, led by expectations in the North West and Northern Ireland.
In the lettings sector, tenant demand rose nationally for the fourth consecutive month in September. Set against this, instructions to let remained in decline, with the survey’s series for landlord listings having been stuck in negative territory since October 2016.
Rental projections for the year ahead point to growth of just over 2%, with this rate anticipated to accelerate, averaging around 3.5% per year over the next five years.
In London, tenant demand has staged a sustained recovery over recent months, increasingly outstripping supply. Although rents are still expected to see little change in the near-term, five-year projections point to stronger rental growth coming through further ahead.
Steve Seal, the Director of Sales & Marketing at Bluestone Mortgages, responds to the survey: “Today’s results highlight the UK’s consistent regional differences and overall slowdown in the market. However, this shouldn’t take our eyes away from the active areas of the market, particularly the northern powerhouses, where a record number of first time buyers are stepping onto the property ladder.
“More, however, can be done to ensure that a wide range of borrowers have access to lending. Not all borrowers receive the same treatment when it comes to securing finance, and a slight blip in an individual’s credit history shouldn’t exclude them outright from homeownership. Here is where specialist lenders come in – understanding that every borrower’s application needs to be assessed on a case-by-case basis and that they aren’t just a number on a computer screen.”
The New Business Director of Kensington Mortgages, Craig McKinlay, also comments: “As these findings show, the UK housing market is suffering from a bottleneck effect. When we look at the big picture, a lack of supply coming onto market is slowing down the housing chain – discouraging homeowners from downsizing and, in turn, preventing suitable properties being freed up for first time buyers or second steppers.
“With the Autumn Budget a few weeks away, it would be great to see the Government offer incentives for older homeowners to downsize, for example, an exemption from Stamp Duty. There has been a lot of focus on first time buyers, quite rightly; but, unless the Government can make it financially worthwhile for current homeowners to move, then the bottleneck will only continue to be squeezed.”