Growth at the headline level, but regional house price picture remains mixed

There is an increasingly mixed picture across the UK housing market, according to the August 2017, UK Residential Market Survey. Although the headline level shows a return to growth, sentiment is less positive in prime central London and to a lesser extent the wider South East, alongside the North and East Anglia.

Survey in brief:

Mixed regional picture, with negative trend in prime central London in particular.

Solid growth in many regions, including Northern Ireland, North West, South West and Scotland.

  • National sales have not seen any growth since November 2016.
  • 61% of respondents expect further landlords to exit the market in the next 12 months.

House prices across the regions

In the August RICS survey, 6% more respondents reported prices rising rather than falling at the headline level. However, in central London the reading is stuck firmly in negative territory, with 56% more respondents seeing a fall in prices, posting the weakest result since 2008. While sentiment also remains modestly negative in the South East, the North and East Anglia, elsewhere, the latest figures point to solid price growth in many parts, including Northern Ireland, the North West, Scotland, and the South West.

Going forward, although headline price expectations remain subdued over the next three months, at the 12-month horizon, prime central London remains the only area in which prices expectations are negative.

Interest and supply remains subdued

August saw little change at the national level to buyer enquiries with the broadly flat trend extending into its ninth straight month.  Agreed sales also showed little change with 4% more respondents seeing a fall rather than rise. As such, nationally, sales have not seen any growth since November 2016.

Supply also continues to be an issue with 1% more respondents seeing a fall in new sales instructions at the national level.  Although this has now turned less negative three months in a row, following such a sustained period of deteriorating sales instructions average stock levels on agents’ books are still near an all-time low.

Conversely, new instructions have increased in prime central London during four of the last six months, with a relatively large pick-up cited in both July and August. In keeping with this, the average number of properties on agents’ books in those parts of the capital has risen. By way of contrast, virtually all other regions have seen stock levels decline over the same period.

Investment properties

The August survey contained an additional question to ascertain whether respondents, in the light of policy changes, felt more landlords would enter or exit the market going forward. Nationally, 61% felt landlords would exit the market over the coming year, while only 12% felt there would be a greater number of entrants. Moreover, for the next three years, 52% felt there would be a net reduction in landlords, with only 17% suggesting a rise.

Given the likely resulting supply and demand mismatch in this area, respondents predict that over the next five years rental growth will outpace that of house prices, averaging 3%, per annum (against 2% for house price inflation).

The latest results continue to suggest that the greatest pressure on both prices and activity continues to be felt in prime central London market. Although there are some signs that the wider South East is also losing some momentum, anecdotal evidence suggests the impact is very location specific. Meanwhile the numbers for most other parts of the country point to a rather more resilient marketplace.

It is interesting that over the medium term, the conclusion of the latest survey is that rental growth is likely to outpace increases in house prices. Although the Build to Rent offer is now stepping up a gear, there clearly is some doubt as to whether it can do so at a fast-enough pace to address the shortfall which may result from the more hostile environment for Buy-to-Let investors.

Kindly shared by RICS