Sales volumes across the national housing market in the UK look likely to total just over 1.2 million in 2017, which is almost identical to 2016, according to the latest market analysis.
Overall, in annual terms, the housing market has plateaued and going forward there are several reasons to believe that sales could struggle to breach even the 1.2 million mark during the course of 2018.
The latest outlook analysis from the Royal Institution of Chartered Surveyors (RICS) suggests the near term outlook for activity is muted, with its New Buyer Enquiries indicator having fallen back quite noticeably going into the final quarter of 2017.
That said, the report does add that negative trend diminished to some extent in the November survey results. However, this still suggests momentum across the housing market will be lacking as 2018 gets underway.
It also points out that the markets in in London and the South East have been noticeably weaker compared to the rest of the UK. The net balance for enquires in both of these areas has been in negative territory for a number of months although, again, the latest results do show this turning less downbeat.
The national figures, once London and the South East are excluded, still point to a flat picture for demand, having remained that way through virtually all of 2017. Furthermore, the headline RICS metric on sales has deteriorated in recent months, as the proportion of agents seeing a decline in transactions has increasingly outstripped those reporting growth.
Looking further ahead than the first half of 2018, the report says that to get a handle on the outlook for the second half of 2018, it’s important to examine the forces behind the recent softening in momentum and how likely these are to persist.
One key element is lack of stock, presenting potential buyers with very limited choice and the analysis says that if this then prevents would-be home movers putting their own property on the market, it further exacerbates the issue and it looks unlikely that this constraint will be alleviated anytime soon.
Another obstacle being reported, at higher price points at least, is stamp duty. The increase in the top rate of tax levied in 2014 is still said to be having a lasting impact, impeding activity at these most expensive levels of the housing market.
The report also points out that the additional 3% surcharge on second homes and buy to let investment purchases, coupled with the phasing out of mortgage interest relief, has curtailed demand and reduced the number of buy to let purchasers.
And it adds that political and economic uncertainty is also proving a hindrance, leading to consumer confidence indicators measuring sentiment towards making a major purchase to decline noticeably over the past 12 months.
In addition, the Bank of England’s November rate hike, the first in over a decade, and RICS says this is only likely to add to buyer caution. ‘Nevertheless, with interest rate expectations derived from financial markets not fully pricing in another move until January 2019, the upside for mortgage rates appears minimal,’ the report says.
But perhaps the biggest factor stifling activity in parts of the country is stretched affordability. The report points out that according to the Office of National Statistics (ONS) median house prices across England are now a greater multiple of average earnings at eight times than at any point in history.
As a result of all of these factors RYCS is predicting that sales will total roughly 1.15 million in 2018 and the near term outlook in particular is muted, a fall of 5% relative to 2017.