UK housing market set for slowdown, claims RICS
The latest RICS Residential Market Survey has indicated that the UK housing market is set to slow down over the next three months following a short-term rush on buy-to-let properties.
The national picture
While 74% of those surveyed expected there to be a rush on buy-to-let purchases ahead of Stamp Duty increases coming into effect this April, the UK Residential Market Survey for February 2016 showed that only 17% (net balance) expected to see an increase in sales over the coming three months.
In addition, while house price inflation expectations peaked following the Chancellor’s Autumn Statement, with prices driven by speculation regarding an increase in investor demand, this trend is set to soften from March as investor interest dampens. Only 21% of respondents expect prices to increase over the coming months.
The survey showed that house prices continued to creep up throughout February. Across the UK, East Anglia continues to show the sharpest price increases, with 91% of respondents reporting that prices had risen over the past month.
London and the North East by way of contrast saw very modest gains.
South West enjoys a surge in sales outstripping all other regions
- The South West has seen the highest rise in sales across the UK for the last three months - 49% of respondents experienced a rise in sales rather than a fall and further increases are expected over the year ahead.
- New instructions to sell also increased more sharply in the South West than anywhere else in the UK as 34% of surveyors saw an increase in new listings rather than a decrease.
- New buyer enquiries in the South West rose for the twelfth month in succession with 49% more respondents seeing an increase in demand rather than a fall.The highest in the UK.
Uncertainty weighs on London housing market
- Price expectations turn negative in prime central parts of the capital.
- After sharp periods of inflation, London house prices look set to stabilize.
- Outer London boroughs remain firmly positive.
- Zone one properties showing signs of downturn.
Simon Rubinsohn, RICS Chief Economist: "Anecdotal evidence has suggested that a combination of exogenous factors is contributing to the overall picture in prime London, with tax changes, foreign market slow-downs and uncertainty over Brexit all being mooted as potential reasons behind the changes in demand. This is not necessarily indicative of the long-term market and the depreciation of the pound could encourage overseas investors back in to the market as could the outcome of the European referendum.
The challenges facing the top end of the capital’s property market are clearly visible in our latest results. However, it is evident that the broader London market remains firm in the face of the on-going shortage of stock and pent up demand. Although agreed sales in February were strong, the dip in new buyer enquiries suggests that it might be reasonable to assume a slower market in the spring as a result of this change.
Over the past three months, we have witnessed a surge in buy-to-let activity. Since the Chancellor made his Autumn Statement announcement last November, investors have rushed to purchase homes before the Stamp Duty surcharge comes into effect. It is inevitable that over the coming months, April’s Stamp Duty changes will take a little of the heat out of the investor market.
While there remain significant doubts as to whether the Government’s plans to encourage a more robust development and construction pipeline will be sufficient to address the housing crisis, long-term price indications for the housing market remain strong, with respondents still expecting them to rise by a further 25 per cent over the next five years."
Andy Sommerville, Director of Search Acumen, comments: “As expected, the residential market is now planning for the surge in buy-to-let purchases to begin tailing off. The rush is coming to an end as the April deadline nears, and this is likely to have a short term impact on sales and possibly prices over the next few months. This isn’t a slump by any means – new instructions and buyer enquiries continued to climb in February - but we may soon see a short lull in sales and price growth.
The final scramble for properties before the stamp duty deadline is undoubtedly putting pressure on conveyancers to deliver in time for their clients. Some firms are feeling the strain more than others, but all are adapting the way they do business, such as greater use of technology, to keep their clients happy.
But let’s not forget that the demand isn’t all from landlords. Help to Buy is making it easier for first time buyers to get onto the property ladder, and in London especially many are seeing the benefits of buying a property through Help to Buy rather than rent.
Over the longer term, the impact of the buy-to-let surge and subsequent lull will be minimal. The structure of the property market and the pressure on the supply of new homes, particularly in the capital, is likely to see the long-term trajectory of sales and prices continue upwards.”