Brexit uncertainty is continuing to be a constraint on the UK residential property market with new instructions falling further to their lowest point since June 2016, according to the latest survey report.
The lack of new houses coming on to the market, presenting buyers with limited choice, is a key factor in dropping activity, with headline indicators on demand, supply and prices all still downbeat.
The figures from the Royal Institute of Chartered Surveyors (RICS) report also shows that buyer enquiries and sales are still negative and there is concern that Government proposals to change Section 21 evictions will mean more landlords selling up.
However, it adds that asking prices are now more realistic with 62% of survey participants report sales prices have been at least level with asking values. Because there is still no Brexit deal a change in momentum is not anticipated in the near term but further out expectations are at least slightly more positive.
The national house price net balance was unchanged in April, coming in at -23% as prices dropped further. The regional breakdown again shows prices under pressure particularly in London and the South East, while the South West has now consistently fallen for the past six months. At the same time, Northern Ireland and Scotland continue to buck the trend, with respondents reporting a further rise in prices.
As the market has slowed, people putting their houses on the market are now perhaps more realistic with pricing and for properties listed at up to £500,000 and below, 62% of survey participants report sales prices have been at least level with asking, up from 57% in October 2018.
The sustained fall in new buyer interest of late has been a key factor behind weaker price trends in parts of the country and demand fell once again in the latest report. On the back of this, the survey’s indicator on newly agreed sales remained in negative territory for a ninth consecutive month.
Looking ahead, near term sales expectations remain negative, and, expectations still point to a flat or declining sales trend across all parts of the UK in the coming three months. Further out, however, a headline net balance of +13% of contributors anticipate sales will begin to pick up to some extent over the next 12 months.
In the lettings market, tenant demand continues to climb slowly while landlord instructions continue to dwindle, extending a run of successive quarterly declines dating back to the middle of 2016. This is already the longest uninterrupted sequence of falling landlord instructions since the series started in 1998, and anecdotal evidence signals little chance of a turnaround.
Comments from contributors also suggest that the upcoming lettings fee ban and the proposed abolishment of section 21 could lead to more landlords exiting the market coming on top of tax changes within the sector over recent years.
Either way, rents are projected to rise to by around 2% at the national level over the coming twelve months, with growth seen accelerating to average 3% per annum over the next five years.
‘Although there are signs of greater realism on pricing from vendors, there is little conviction in the feedback from respondents to the survey that activity in the housing market will pick-up anytime soon. Significantly, the key RICS buyer enquiries indicator remains subdued and sales expectations looking a year out are only modestly positive,’ said Simon Rubinsohn, RICS chief economist.
‘New build is generally performing more strongly than the existing market, the challenging narrative around housing is likely to have some impact on the delivery pipeline making it harder to meet the ambitions for supply the Government has set itself,’ he added.
According to Tamara Hooper, RICS policy manager, to encourage an efficient and balanced private rented sector, better standards and regulation need to be embedded into the industry, to give the security and conditions needed by tenants and to provide the clarity of good performance for landlords and agents.
‘RICS does not believe that the announcement’s made by Government around Section 21 will help bring about the changes within the industry that the Government hopes, without significant and sweeping changes to the entire S8 process,’ she said.
‘The Private Rented Sector has always been a careful balance between landlords’ and tenants’ rights and obligations. While an efficiently functioning sector, should give security to tenants that they can’t be evited on a whim, it should also allow for landlords to easily evict troublesome tenants,’ she pointed out.
‘We believe that the way to raise standards in the UK’s residential sector is to ensure that all individual lettings, estate and property management practitioners and firms are regulated by a recognised professional body and overseen by an appropriate regulatory body or government department. This would match systems in the accountancy and legal professions,’ she explained.
‘A regulated PRS would enhance the landlord-tenant relationship, as well as build institutional investor confidence in a growth sector that offers housing solutions to increasing numbers of households. As a sector leading body, we already create and regulate professional standards in property and of our professionals who work within the industry,’ she added.