The housing market is still subdued and this lack of momentum is likely to continue for a while longer, RICS’s Residential Market Survey has predicted.
It remained subdued in March, a picture that has been evident in the sales market for several months now. In March, enquiries from new buyers saw the eighth negative reading in a row, with 27% of respondents seeing a fall in buyer demand. Demand fell across all parts of the UK.
Simon Rubinsohn, RICS chief economist, said: “Brexit remains a major drag on activity in the market with anecdotal evidence pointing to potential buyers being reluctant to commit in the face of the heightened sense of uncertainty.
“Whether any deal provides the shift in mood music envisaged by many respondents to the survey remains to be seen but as things stand, there is little encouragement to be drawn from key RICS lead indicators. We expect transactions to decline on this basis.
“Arguably more significant still are the signs that developers are continuing to adopt a more cautious stance with the trend in new residential starts now flatlining. Against this backdrop, there is little possibility of delivering the uplift in supply necessary to address the ongoing housing crisis.”
As buyer interest declines, 24% more surveyors saw a fall in agreed sales. This is consistent with an expected drop in the HMRC measure of transactions – currently operating at around 100,000 per month – over the coming months, reflecting the RICS series role as a lead indicator.
Beyond, there is a little more optimism, with sales anticipated to rise over the course of the next year.
The ongoing decline in new instructions and new property coming on to the market continues, having become progressively weaker in each of the past four surveys, falling from the net balance of -20% in December, to -30% in March.
As a result, despite reduction in agreed sales, average stock levels on estate agents’ books remain at 42 properties per branch.
Looking at prices, 24% more surveyors saw a decline rather than rise in prices at a headline level in March.
This is up from -27% in February, and while it ends a streak of eight consecutive months of declining responses, it still points to a modest fall in house prices at the national level over the next couple of quarters.
London and the South East continue to display the weakest sentiment regarding prices, with Scotland and Northern Ireland the only parts of the UK to have seen sustained price growth on a consistent basis, over the past two months.
Looking ahead, at the national level, 15% more respondents anticipate house prices will be higher in 12 months’ time.
In the lettings market, demand from tenants continued to rise for a third successive month, while landlord instructions slipped further. On the back of this, contributors are pencilling in rental growth of approximately 2% over the coming 12 months.
Adrian Moloney, sales director of OneSavings Bank, added: “House purchase activity continues to be struggle to gain momentum due to the ongoing macro-economic and political uncertainty.
“There seems to be clear message from buyers that purchase decisions are on hold until we have more certainty within the market, particularly on the UK’s position following Brexit.
“However, there are still key issues within the market that need addressing which have largely been overshadowed. Indeed, we still have clear supply and demand problem, leading to higher prices, frozen property chains, and limited home ownership for younger generations.
“The latest research suggests that first-time buyers now need to save for 10 years for a house deposit.
“Steps have been taken recently to address the supply/demand imbalance, including the Chancellor committing £3bn extra to deliver 30,000 new affordable homes, but more needs to be done to ensure we are meeting these targets in order to create any real impact to the market.”
Benson Hersch, chief executive of the Association of Short Term Lenders (ASTL), said a housing market shackled by uncertainty can lead to broken chains and problems for developers who need longer to market their properties.
He said: “In this situation, fast and flexible short-term finance can prove invaluable for borrowers, helping to keep transactions alive and investors to realise the true value of their assets by bridging the uncertainty and keeping the market moving.”