Stamp duty change to have limited impact as new buyer interest drops further

The UK housing market continued to display a lack of momentum in December, with buyer interest edging lower. Changes to Stamp Duty for first time buyers is having little immediate effect, according to the December 2017 RICS UK Residential Market Survey.

Survey in brief:
  • 86% of respondents report no response yet from first time buyers following changes to Stamp Duty
  • Buyer interest edges lower as sales and new instructions continue to decline
  • However, the twelve-month outlook for prices and sales is more upbeat

Falling enquiries

In December, activity in the UK housing market continued to drop. After new buyer enquiries came close to stabilising in November, 15% more respondents noted a decline in demand (as opposed to an increase) in the month of December.

Stamp duty changes improving sales activity?

Furthermore, when contributors were asked whether they have seen an increase in first time buyer enquiries following changes to Stamp Duty in the Autumn Budget, an overwhelming majority of 86% across the UK said they hadn’t.

While this could be in part due to the time of year, respondents were also asked to consider the likely impact on the market over the coming months. Nationally, the majority of respondents (66%) anticipated the change having little consequence, whilst 12% felt it would result in higher overall activity. In London, however, 48% envisaged not much response but a higher proportion of respondents compared to the national figure (28%) did say the changes would increase overall market activity. The results for the wider South East are closer to the national picture.

What will happen to sales in 2018?

Agreed transactions also fell at the national level with 13% more respondents reporting a decline in volumes over the month. Significantly, Scotland, Northern Ireland and the North East region were the only areas to suggest stronger transactions, whereas sales trends were either flat or negative across the rest of the UK. Sales expectations nationally remain flat over the coming three months, but  respondents are more optimistic over the year to come with activity anticipated to pick-up across all regions/countries over the next twelve months (with London recording its first positive reading since last June).

Looking at supply, new instructions continued to decline nationally, extending a run of 23 months. Comments from respondents continue to emphasise the adverse impact this is having on the market.  There is however a possible improvement on the horizon with 23% of contributors noting that appraisals were higher this December than last (compared to 15% of respondents in November).

Growing house prices

Looking at prices, the headline balance moved to +8% in December following a reading of zero in November. As such, this measure is now consistent with a marginal increase in prices nationally (on the most closely followed indices) over the coming months. The three month price expectations series however remains negative at the national level, highlighting a lack of conviction surrounding the near term outlook.

Is there enough property to rent?

In the lettings market, tenant demand continued to fall during December (on a non-seasonally adjusted basis) albeit the pace of decline eased somewhat from the previous report. Meanwhile new landlord instructions declined at a slightly faster rate. As a result, rental growth expectations were modestly positive for the three months ahead (net balance moving to +9% from +4%).



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