Demand grows for UK housing, although uncertainty lies ahead

Sales of new homes increased for a third consecutive month across the United Kingdom, as has buyer demand for UK housing and new instructions, according to the February 2020 RICS UK Residential Market Survey.

The February 2020 UK Residential Market Survey revealed a net balance of +20% of respondents saw an increase in new buyer enquiries over the month, the third period of growth in a row. In addition, experts are forecasting a better sales outlook for the rest of the year, with +61% of survey participants saying they expect more homes to be sold as the year progresses.

New homes coming onto the sales market also nudged up for a third straight month, with new instructions seeing a net balance increase of +15% in February – with West Midlands and the South East seeing the biggest bump in new properties coming onto the market.

Strong demand has also seen prices increase in February, with a net balance of +29% of contributors reporting house price growth– up from +18% on the previous month. While there was growth in all regions of the UK, London, Yorkshire and the Humber and East Anglia all saw the strongest increase in house prices. Furthermore, a net balance of +22% are expecting house prices to continue to rise further over Spring.

However, concerns have been raised by property professionals about the impact of coronavirus which although yet unknown, could adversely affect viewings and the traditional spring house selling season.

Simon Rubinsohn, RICS Chief Economist, said:

“It is encouraging that the results of the latest survey continue to show a positive trend both in terms of potential buyer interest and new instructions to agents. Indeed, this is the first time since 2014 that new supply to the market on the RICS indicator has increased for three consecutive months.

“Inventory levels are still at historically low levels despite this but the firmer trend in appraisals suggests that the picture could improve over the coming months providing the coronavirus doesn’t become more of an inhibitor of activity in the sector.

“For now, at least, feedback around expectations are consistent with activity levels continuing to strengthen albeit relatively modestly.”

Residential lettings also saw demand increasing from prospective tenants, however the number of properties listed by landlords for rent fell again – extending the decline again since it was first recorded in 2016. Rising demand for homes to rent and falling supply will see rents increase by potentially 2% – and up to 3% per annum by 2025 if this trend is maintained.

The increased buyer demand comes ahead of Chancellor Rishi Sunak’s budget – with RICS calling on the Government to boost the property industry as the UK transitions towards leaving the EU.

Commenting ahead of the budget, Hew Edgar, Head of RICS UK Government Relations & City Strategy, said:

“With demand for new homes set to grow even further, there is much the Government can do to help level-up the property market in the UK which is transitioning outside of the EU – but it does require bold action up-front to maintain the positive momentum.

“The ball is in the Chancellor’s court and his first budget is a great opportunity to deliver the long-term confidence the property industry and investors need – he can achieve this by reviewing stamp duty to encourage the supply of more homes, ensuring its fit for the twenty first century, to overhauling business rates and making existing buildings greener by incentivising retrofitting.“

Kindly shared by Royal Institution of Chartered Surveyors (RICS)