Property

Property demand and sales settle, says RICS

According to the latest RICS Residential Market Survey, a steadier trend is emerging for sales activity across the UK, with key indicators more stable relative to recent months.

Warren Lewis
|
10th May 2018
sold

According to the latest RICS Residential Market Survey, a steadier trend is emerging for sales activity across the UK, with key indicators more stable relative to recent months.

Nevertheless, prices continue to fall in some parts, with London and the South East in particular showing further weakness. While near term indicators are generally flat for both sales and prices at the national level, twelve month expectations point to a modest pick-up further out.

The national RICS Price balance slipped to -8% in the latest results, having signalled a flat outturn in each of the past two reports. Although this signifies the most negative figure since November 2012, it is consistent with only a very marginal decline in prices at this stage. Furthermore, the national reading continues to be heavily weighed down by feedback from London, where a net balance of -65% of contributors noted lower prices over the period. That said, respondents in the South East also continued to report falling prices, while the net balance turned marginally negative in the South West for the first time since May 2013; it remains to be seen whether this marks the start of a new trend or an aberration. By way of contrast, house price inflation remains firm in Northern Ireland and Scotland.

The national near term outlook for prices remains broadly flat, with modest gains in some parts of the country being offset by declines in others. Further ahead, however, a headline net balance of +31% of respondents expect prices to be higher in a year’s time. Virtually all areas of the UK exhibit comfortably positive twelve month price expectations, led by the strongest sentiment in Scotland and the North West of England. On the same basis, expectations remain downbeat in London, albeit the net balance of -20% was the least negative since June 2017.

As with buyer demand, agreed sales also held relatively steady over the month, having fallen back noticeably for a number of reports. The regional picture still remains varied however, with sales only rising (to any meaningful extent) in four of the twelve regions/countries covered by the survey. Interestingly, London was one of those four areas, where a net balance of +10% of contributors cited an increase (the first positive reading in over twelve months).

Going forward, near term sales expectations point to a broadly flat picture for transactions at the national level. At the twelve month horizon, expectations are not much stronger, although a marginally positive net balance of +8% expect sales will rise over this time frame. When disaggregated, Scotland exhibits the most upbeat assessment for sales prospects over the coming year.

In the lettings market, tenant demand in the three months to April was stagnant, as the net balance slipped to +1% from +6% in the previous quarter (seasonally adjusted series). Part of the softness may be down to the dearth of new landlord instructions coming onto the rental market, with this indicator remaining negative for an eighth successive quarter. Rental growth expectations, although still slightly positive, moderated both at the three and twelve month horizons on the back of subdued demand momentum.

Alan Collett, fund manager at Hearthstone Investments, comments: “The RICS survey for April supports our view that residential property continues to offer opportunities for savvy investors while prospective movers sit on the side-lines.

Although the picture nationally was subdued, there were significant regional variations in both the level of enquires and also in the expectations of house price growth. In line with our own experience, the survey showed weakness in house price growth in London and the South East, but firmer conditions in other parts of the UK. The weakness is also concentrated in higher value properties. We expect price growth to continue in areas such as the Midlands and northern regions of the country, where average earnings are keeping pace making property ownership affordable. These areas also offer prospects for continuing rental growth, highlighting the benefits of a nationally diversified investment portfolio.”

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