May 2015: Residential Market Survey
‘Prices gain further momentum as supply tightens once more and demand picks up speed’ -RICS
- Buyer demands increase at a rapid pace since April 2014
- New instructions continue to fall with average stocks per surveyor hitting a new low
- Near term price expectations tick up, led by London
The May 2015 RICS Residential Market survey suggests a high rise in the house price inflation throughout May, with the headline balance reaching up to +34 from +32 last time. The rate of price growth has now accelerated in each of the last four reports after decreasing considerably during the second half of 2014. Pressure on supply conditions continue to dictate the underpinning of prices with new instructions to sell becoming more and more sparse whilst average stocks per surveyor fall to a record dip (52 properties).
Hopes of an increase, post-election, in new vendor instructions appeared misplaced as new listings declined for the fourth month in a row and have failed to see any consequential growth since 2013. The biggest decrease was again seen in the North West and London, contrasting with the only reported rise in new instructions coming from Scotland. Interest from new buyers increased in May after a period where demand had been mostly flat. Ten out of twelve areas covered in the RMS survey recorded a increase of enquires whilst buyer interest was more or less unchanged in Wales and the South East.
The improvement in demand is yet to be reflected in the agreed sales data which shows transactions edging up ever so slightly, effectively overturning the modest falls recorded in the preceding two months. Having said that, some parts of the UK are seeing solid growth in activity, noticeably more in the South West, Northern Ireland, Yorkshire and Humber. On the other end of the scale, London and the North West’s sales are fading, this could be down to the lack of suitable stock. Going forward, the three month sales expectations have strengthened both at headline level and across several parts of the country, whilst respondents still forecast significant solid increases by the twelve month horizon.
Despite the somewhat steady sales trend, moderate demand growth and sharp shortage of supply are combining to push house price inflation higher. Price growth has gained momentum in four consecutive months, whilst the average stocks per surveyor has decreased approximately 12% since the turn of the year. When analysing price momentum at country/regional level, the North West, South West, East Anglia and Northern Ireland posted the fasted rates of increase over the past three months.
Intriguingly the May results show a significant up-tick in near term price expectations. The net balance of surveyors expecting prices to rise over the next few months increased to +38 from +17 previously. The uphill shift in sentiment was led by London, where we expectations rose to +49 after +12 in April. Respondents are confident that price will increase across all part of the UK over the next twelve months.
Over to the lettings market tenant demand continued to increase in May, continuing its fifth consecutive month of uninterrupted growth. East Anglia was the stand out region with increase in demand, as it was in April. Over this time new landlord instructions experienced little change at the headline level, in keeping with the trend seen over the last five months. It is anticipated that rents will increase across all parts of the UK in the next three months and over the next twelve months rentals are projected to increase by just under 3% on average nationwide.