General Election impacts May housing market activity
The General Election has been cited as a factor affecting market activity as both demand and agreed sales continued to fall last month.
May 2017’s RICS UK Residential Market Survey painted a subdued picture of the market once again, with instructions, sales and enquiries falling throughout. Although it remains positive, price growth momentum has also slipped, with a further decline predicted on a near-term basis. The election has also been cited as a contributor to reduced market activity, as both buyers and vendors tend to become more hesitant during times of political upheaval.
Although it fell from 22% to 17% – the lowest reading since August last year – the headline price growth indicator remained consistent with the minimal gains. Prices in London continued to fall, with the gauge for price growth remaining in negative territory for the fourteenth successive month. Across everywhere else in the UK, prices tended to see varying degrees of uplift.
Price expectations in the near term softened for the third consecutive month, falling from 5% in April to -1%. In the South East, the near-term expectations indicate price weakness, whereas there is much more confidence for price growth in twelve months time. Nationally speaking, the longer term expectations stayed strong with a net balance of 54%, with contributors predicting house price inflation to average at a yearly 3.5% in five years time.
Whilst prices are being upheld by the current lack of supply, the market gives no indication that the fall in sales instructions will subside. May saw the lowest number of new listings since July 2016, with 25% more respondents noting a reduction. However, this fall has been linked to extraneous factors such as the General Election. Vendor uncertainty means the levels of supply remain low, with the number of available homes on estate agents’ books at 43.
Having remained stagnant over recent months, the number of new buyer enquiries saw a modest fall in May, a result which respondents have also been linked to the General Election. Some did, however, remain more optimistic. Agreed sales continued to fall for a second consecutive month, with the national indicator delivering a net balance of -8%. However, the average completion time for a transaction remained at 16 weeks, despite the slight decline in sales.
On a near-term basis, respondent expectations suggest that there will be little variation during the upcoming months. However, the twelve-month picture appears very different, with a net balance of 26% anticipating sales growth activity to increase. Although seeming optimistic, this figure is below the recorded long run average of 38%.
When broken down regionally, the most positive views on future sales activity were found in Wales and the South West.
On a non-seasonally adjusted basis, tenant demand saw a slight uplift in May, with fresh landlord instructions remaining relatively unchanged. There was a 17% increase in the number or respondents expecting to see a growth in rents during the next three months. The twelve-month outlook predicted headline rental growth of 2%.
Rental predictions in London, however, are again the exception to the rest of England and Wales. Expectations here remain negative on a short-term basis, and the flat twelve-month outlook also seems relatively unchanged.