Long term stability predicted for housing market
Buyers are starting to return to the UK housing market but have little choice of new properties in the short term, while sentiment indicates longer term stability in the housing market according to the latest RICS Residential Market Survey.
The anticipated fall in demand in the run up to the Stamp Duty deadline has now passed and there is evidence that sales will stabilise going forward. The survey highlights a fall in both the number of appraisals completed, below September 2020 figures, with 35% of respondents reporting a further fall in instructions in September.
Alongside this, for the third successive month newly agreed sales dipped, with 15% (net balance) of respondents reporting a decline.
The lack of choice continues to create competition amongst buyers with knock on upward pressure on prices. While respondents believe that house prices will continue in the short term, over two thirds of respondents (70%) anticipate prices will continue to grow over the coming twelve-months.
The current rise in property prices is one of the factors driving inflation which, according to reports over the weekend, may result in interest rates rises “significantly earlier” than expected. In an interview with the Sunday Telegraph Michael Saunders, a member of the Bank of England’s Monetary Policy Committee, said that financial markets were right to have priced in an earlier rate rise, hinting that an increase may come before the end of the year.
Results show a steadier trend in buyer demand in September, after a brief pull-back that followed the wave of activity around the Stamp Duty holiday. This more stable trend in buyers sees expectations for sales in the coming three months gaining momentum, with 11% more respondents this month anticipating an increase in sales expectations, up from +6% (net balance) in August. The twelve-month sales expectations point to a stable trend in sales over the year to come.
Simon Rubinsohn, RICS Chief Economist, commented:
“The imbalance between demand and supply remains the most striking theme in the latest RICS Residential Market Survey. And feedback from members provides little reason to believe this issue will be resolved anytime soon. This is very clearly reflected in the forward-looking metrics, with both price and rent expectations close to series highs pointing to put greater pressure on affordability at a time when money markets are sensing interest rate increases coming sooner rather than later.
“Delivering higher numbers of new homes is part of the answer but it is critical they are built in the areas where the shortfall is most visible. It is also vital that the tenure mix of the supply pipeline is broadly based helping to address the challenges both in the private rental market and in social housing.”
The full report is available to view here