The UK housing market remained subdued in July, with buyer demand and agreed sales showing little sign of a meaningful recovery, according to RICS.
The Royal Institution of Chartered Surveyors’ UK Residential Market Survey recorded a net balance of -28% for new buyer enquiries, unchanged from June.
Agreed sales also remained in negative territory at -30%, although this was an improvement on the -37% recorded in April.
Near-term sales expectations improved for a fourth consecutive survey to -14%, while the 12-month outlook rose to +3%, its most positive reading since February.
PRICE FALLS REMAIN WIDESPREAD
The national house price balance improved marginally from -32% to -30%, indicating that more surveyors continue to report falling prices than increases.
London, the South East and South West recorded particularly negative balances, while prices continued to rise in Northern Ireland. Scottish price growth appeared to be flattening.
Three-month price expectations stood at -31%, while the year-ahead balance was slightly positive at +4%.
London’s 12-month outlook deteriorated from -10% to -23%.
NEW LISTINGS STABILISE
New vendor instructions improved from -23% in June to -4% in July, suggesting the flow of homes entering the market stabilised.
Market appraisals were 19% higher than during the same period last year, although RICS says the pipeline of new listings remains constrained.
LANDLORD SUPPLY CONTINUES TO FALL
Tenant demand was broadly flat during the three months to July, falling from a balance of +12% to -1%.
Landlord instructions remained firmly negative at -27%, with survey respondents reporting that some owners were selling properties or reducing their portfolios.
Despite softer demand, a balance of +28% expects rents to increase during the next three months, up from +25%.
DOWNBEAT METRICS
Simon Rubinsohn, Chief Economist at RICS, says: “The housing market remains subdued, and while that is not unusual over the summer months, it is clear from the RICS seasonally adjusted data that the combination of geopolitics, the domestic political climate and the cost of mortgage finance are continuing to weigh on sentiment.
“Significantly, the forward-looking metrics also remain downbeat, which is not the sort of climate likely to encourage housebuilders to step on the gas on existing sites or in land-buying, as highlighted in recent trading statements from developers.
“Meanwhile, feedback from respondents to the RICS survey is continuing to draw attention to the impact of the latest round of regulation on the rental market, with the key indicator of new instructions pointing to a further drop in supply.”
OPPOSITES ATTRACT
Tom Bill, Head of UK Residential Research at Knight Frank, says: “The backdrop is less volatile than last summer but upwards pressure on mortgage rates and tax uncertainty are the familiar causes of hesitation among buyers, which means demand is improving but from a low base.
“While the Prime Minister has ruled out a land value tax, the aversion to spending cuts on the backbenches means the government will need to raise a selection of smaller taxes by default and that creates uncertainty.
“Meanwhile, borrowing costs don’t appear to be heading for a meaningful drop as the unpredictable Middle East conflict drags on.”
And he adds: “The Renters’ Rights Act appears to be doing the opposite of what was intended by increasing the financial squeeze on tenants. Supply has fallen and asking rents have risen as landlords face greater financial risks under the new legislation, which for now is proving largely counter-productive.
“ Future changes to the minimum energy performance of rental properties may aggravate the situation unless implemented with care.”
MISSING BURNHAM BOUNCE
Jeremy Leaf, north London estate agent and a former RICSR Residential Chairman, says: “Although thankfully not as quiet as a few months ago, the market is not seeing signs of a ‘Burnham Bounce’ – yet.
“It may be down to the time of year, but fewer listings mean the relatively low number of proceedable buyers have less choice, which is slowly increasing the pace of decision making.
“However, the market remains price sensitive so generating buyer traction remains challenging, particularly while uncertainty about possible mortgage rate increases continues.”
And on lettings he adds: “Demand to let, especially for houses, remains strong. On the other hand, the quantity of prospective flat tenants is generally good but the quality is not.
“Overall, lack of choice means rents remained firm but there is little pressure on landlords to improve standards.
“Some landlords are still selling due to Renters’ Rights Act worries and they are not being replaced. Those staying are insisting on better quality references just in case.”
