According to the October 2017 RICS UK Residential Market Survey the UK housing market continued to stutter in October with both demand from buyers and agreed sales declining
With most UK regions showing a flat or negative trend in newly agreed sales, momentum in the market is likely to remain subdued in the near term.
Overall, the national price net balance eased to +1% in October, following a reading of +6% in both the previous two months. This measure is now consistent with a flat price trend on a UK-wide basis, although there remains significant variation across regions. Indeed, respondents
in London continue to report downward pressure on prices, with the net balance coming in at -63% (the poorest reading since 2009).
To a lesser extent, the price gauge remains negative in the South East, while East Anglia and the North East also returned readings below zero. In contrast, the price balances elsewhere remain generally firm, with the North West of England, Wales, Scotland and Northern
Ireland all returning numbers consistent with further house price gains.
Alongside this, the headline near term price expectations series slipped to -11%, from -8% in September, and has now been negative in each of the last three reports. Again,
the most cautious sentiment continues to be returned by contributors in London, although expectations are now also slightly negative in five other regions within England.
The 12-month view is stronger in most parts however, with 10 of the 12 regions/countries covered in the report expecting to see higher prices in a year’s time. The two exceptions are London and the South East, where prices are anticipated to decline and remain flat, respectively.
When contributors were asked to compare sales prices with asking prices over the past two months, the data revealed greater discrepancies for more expensive homes. Nationally, for properties marketed at more than £1m, 71% of respondents reported sales prices coming in below asking prices (compared with 67% the last time the question was asked in July). Within this, 26% responded in the “up to 5% below” category, and 35% answered “between 5 and 10% below”.
For homes listed at between £500,000 and £1m, 62% of contributors noted sales prices were coming in lower than asking prices (compared to 57% in July). The commonest answer was “up to 5% below”. Finally, in terms of homes marketed at less than £500,000, the largest share of respondents (42%) noted asking and sales prices were at roughly the same level, although a still significant 32% stated sales prices were up to 5% under.
In terms of activity, the New Buyer Enquiries series continued to signal a softening in demand, with the national net balance coming in at -20% (unchanged from September). Likewise, agreed sales were also reported to have fallen, as 20% more respondents noted a decline in transactions over the month. Wales, Scotland and the North East were the only areas to have seen any pick-up during October, while sales trends were either flat or negative across the rest of the UK.
Going forward, national sales expectations remain flat over the coming three months, while the 12-month view has turned marginally negative. Expectations are still reasonably positive in Scotland and Northern Ireland.
In the lettings market, tenant demand was little changed during the three months to October, while new landlord instructions remained in decline. Rental growth projections are modestly positive for the three months ahead (net balance +11%). Over the next five years, rents are anticipated to rise by an average of around 3.5% per annum, nationally. This compares with price growth projections of just above 1% over the same timeframe. London remains the only area in which 12-month rental growth projections are negative, with tenant demand still lacking momentum.
The survey also found that it was taking longer to complete a sale, seen as further evidence that the housing market is slowing down. For sales completed in October it took an average of 18.5 weeks to sell a house, up from 16.6 weeks in February, when this measure was first introduced.
RICS chief economist Simon Rubinsohn said: “The combination of the increased cost of moving, a lack of fresh stock coming to market, an uncertain political climate and now an interest rate hike appears to be taking its toll on activity in the housing market.
“With both buyer inquiries slipping and sales expectations subdued, the sense is that home owners are staying put and first-time purchases are increasingly focusing on that part of the market supported by the Help to Buy initiative.”
He added:“A stagnant second-hand market is bad news for the wider economy, not just in terms of spending but also because it restricts mobility.
“Prices do now seem under pressure at the more expensive end of the market with a further rise in the number of properties transacting at below the asking price. But it is important to not characterise the whole of the market by what is happening in parts of London and the wider South East.”