Housing supply still short, says RICS
The RICS Residential Market Survey for November indicated a small rise in enquiries from new buyers, for the third month in a row. Expectations in the short term indicate a moderate yet ongoing activity for the upcoming months.
As the majority of respondents observed an increase as opposed to a decrease, the RICS price balance attained its highest reading since April of 30%. The most solid growth was seen in the North West of England and the West Midlands for the second consecutive month. A marginally greater amount of surveyors in the North East of England, Wales and London witnessed a drop rather than a growth in prices. The downward momentum in London however, seems to have eased to a significant extent in comparison with previous months.
Over the course of the month, aggregate level demand grew modestly as 13% more surveyors observed an increased in enquiries from new buyers as opposed to a fall. November generally saw a rise in enquiries for the majority of the UK.
Tight supply conditions
Relative to October, conditions remained largely unchanged on the market’s supply side, which in some areas saw a rise in instructions which offset the falls elsewhere. At the headline level, this meant the supply picture was flat, with the net balance of new instructions coming in at 0%.
Demand growth meant agreed sales saw a further rise, with a net balance of 9% of respondents witnessing growth during the month. Although this has been the greatest reading since February, it continues to represent a very modest increase in activity. Paired with the rise in sales activity, tight supply conditions have led to further depletion of housing stock availability, as well as respondents from the majority of the UK bringing up the supply shortage as a significant feature of the current market.
Despite the outlook in the short term remaining positive for transaction levels, a 6% drop in surveyors expecting activity to increase indicates a slight moderation. In terms of the annual outlook however, confidence was expressed by contributors in all areas, with a non-seasonally adjusted net balance of 31% predicting a rise in activity.
Where prices were concerned, the short term outlook was largely similar to October with a 14% net balance of contributors expecting a growth over the next three months, and some growth predicted for the majority of the UK. For the 12 months, the outlook in all areas remains positive with a non-seasonally adjusted net balance of 40% predicting growth. There is however, less confidence in London price prospects for the year ahead, in comparison with other areas. Here there is a net balance of 11% of respondents expecting growth, and London’s largest properties expected to grow the most reduced rate. Over the past couple of years, changes in tax have been widely referenced as an obstruction to transaction activity at the greatest price points.
33% of respondents at the national level believe their local markets are overpriced to some extent, relative to economic fundamentals. The greatest proportion of 63% believe that prices are currently at a fair value. The South East possesses the largest share of contributors (58%) who believe that prices at present are above fair value.
Lettings and tenant demand
The lettings market observed a more modest past of tenant demand, on a non-seasonally adjusted basis. This is commonplace for this time of the year, with a 15% increase in respondents who reported an increase rather than a fall. New landlord instructions slightly dropped at the headline level with 6% more contributors observing a fall rather than a rise. Across most areas, tenant demand continues to outpace supply, with rent expectations remaining positive as 17% more contributors predicting growth as opposed to a fall.
Remaining an outlier for surveyors, the London rental market continues to observe a fall in tenant demand, with rent forecasts for the fifth consecutive month in negative territory.
Commenting on the recent market activity was Andy Sommerville. The Director of Search Acumen mentioned the increase in activity reflected a recovery in the market, following the referendum result uncertainty:
“Confidence levels among hopeful homeowners have fluctuated significantly over the past 12 months, as the ripples of economic and political uncertainty around the EU referendum have led many to delay any decision on their sale or purchase. However, recent activity shows signs of the market calming down with interest from new buyers increasing in the UK for a third consecutive month. These positive noises from those looking to buy a home are reflected in the surveyors’ predictions of a modest rise in activity over the coming months.
“Demand, however, has never been the hurdle in the industry. The supply shortage, on the other hand, continues to be the stumbling block and it is no surprise that nine continuous months of no increase in new properties arriving on the market has caused many to forecast a dreary beginning to 2017.
Mr Sommerville also highlighted the need for greater governmental innovation in order to accelerate the property market:
“As 2016 comes to a close and we welcome in the New Year, it is time that the property sector receives the jump-start it desperately needs. The Housing Infrastructure Fund announced in the Autumn Statement is a step in the right direction but these targeted investments must be quickly executed to make a significant impact. Further funding and much more innovative thinking from government will be required to prevent our housing crisis crossing the line of no return, with first time buyers losing all hope of home ownership.”