Market continues to tighten as demand strengthens further

Market continues to tighten as demand strengthens further

The February 2014 RICS residential market survey has shown a continuation of trends since mid-2013, with the headline price net balance remaining positive as prices continue to rise across the UK.

Sustained increase in demand coupled with a lack of new instructions has kept house prices rising, with findings showing the most acute lack of new instructions is being felt in the south of the country.

Although a few reports did suggest some marginal increases in supply, the number of new instructions remains at an unusual low compared to past years.

While activity increased more moderately in February than in past months, the continued strengthening of demand did push sales higher, with the moderate increase being put down to a combination of adverse weather and the lack of property becoming available on the market.

Agreed sales were reported to have increased or remained stable nationally, with the sales-to-stock ratio that measures the tightness of the market increasing to 38 per cent, representing the highest level since 2007 as stock levels of respondents were at record lows.

This overall positive trend in demand has kept price and sales expectations relatively high and those who responded to the survey said they expected net balances of 34 and 69 at the 3 and 12 months horizons.

Such predictions are indications that confidence in the future activity is relatively strong, supported by easier credit conditions strengthening activity, with mortgage approvals in January reaching their highest level since the recession began.

The RICS price expectations series, which has been running since 2010, showed that confidence in price appreciation at 12 months strengthened to a series high value of 78, and over the coming five years, respondents now expect prices to grow by an average of 5.9 per cent every year, a compound growth of over 30% for the period.

The survey also showed that price expectations are substantially higher in London and the South East than in other regions, with expectations for average growth of 8.8 per cent and 8 per cent per year respectively over this period.

New landlord instructions in the letting market were broadly unchanged, with rents over the coming year only expected to increase by two per cent, as tenant demand grew at a slightly greater pace than in January.

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