Last months’ sales market showed key signs that it remained subdued as transaction volumes showed little change for the third consecutive month.
February’s 2017 RICS UK Residential Market Survey indicated that new buyer enquiries remained relatively unchanged, having grown very little since November 2016. Expectations in the short term are positive despite predictions of growth to remain minimal in the upcoming months.
Sales Market
Unchanged from January’s figure of 24%, February’s headline price balance came in at 24%. In the majority of regions, respondents saw a growth in prices, with improvements occurring in Northern Ireland and the strongest increase being reported in the North West of England. In contrast and with prices falling for the fourth consecutive month, London has reported an annual decline in prices, with the majority of activity located within the inner boroughs.
Although enquiries from new buyers were positive last September, the past few months has seen activity fall, with February’s reading being reasonably flat. Regionally speaking, the strongest momentum can be found in the South West, with the East Midlands being relatively weak. January’s decline in new listings continued into February, as a further 14% of respondents reported a fall in instructions relative to 12% in the previous period. The declining rate of instructions appeared to be most apparent in the West Midlands and the North West.
As the property supply lost footing and demand remained unchanged, the agreed national sales indicator suggested that the month would remain steady for transactions, with a reading of 2% being reported, following the -2% reading of last month. After almost a year of negative to minimal growth in London, sales activity seems to have picked up. Across most regions, restricted supply paired with stable sales activity has resulted in available stock being eroded further, with levels per surveyor just skimming an all-time low. Survey respondents in most parts of the UK mention the shortage of supply to be a prevalent feature of the current property market.
Where transactions are concerned, the outlook suggests measured positivity as expectations in the short term (at 16%) are still largely unchanged (from January’s 15%). Across almost every area at the 12-month horizon, survey respondents expressed more confidence; a net balance of 37% predicted levels of activity to grow. The strongest expected improvements have been reported in Wales and Northern Ireland, then followed by Scotland and the North West.
Over the upcoming three months, price predictions remained relatively unchanged in February with 13% more respondents forecasting an increase rather than a drop. Near-term price weakness was reported in both London and the North East. The outlook has improved noticeably on a national level, with the net balance of surveyors predicting growth reaching 63% for the next year.
Rental Market
Tenant demand in the lettings market increased for the third consecutive month with 15% more of those surveyed noting a growth – on a seasonally adjusted basis – as opposed to a fall. However, demand growth is more subdued than that of 12 months ago, when 29% more respondents noted an increase. There was also a reported fall in new landlord instructions, with the -10% net balance being the weakest reading in over two years. The downward trend is predicted to continue over the upcoming months, as mortgage interest tax relief changes are due to take effect in April.
Expectations for rent continue to be positive with a net balance in February of 24%. Over the next 12 month period, respondents to the survey predict that rent will grow by an additional 2,7%, Over the next five years, rental growth is expected to accelerate to an average 4.4% per year.
The rental market in London remains the exception, with respondents reporting falling near-term rental predictions and weak tenant demand.
