A steady demand in growth and a lack of stock continue to drive price higher

• Buyer demand rises at the fastest pace since February 2014
• Prices gain momentum for a sixth consecutive month
• Limited stock continues to act as a restraint on both transactions and new instructions

The RICS Residential Market Survey for July 2015 shows price momentum gaining pace, driven by a further rise in buyer demand while supply conditions continue to tighten. At national level, the shortage of unsold property worsened further throughout July, with the RICS stock per surveyor measure reaching a record low of 47.

New vendor instructions dropped back for a sixth consecutive month with a net balance of 22% of contributors reporting a decrease, this decline was widespread with a particularly sharp fall in East Anglia.  Northern Ireland and the North East of England were the only areas to see a noticeable pick up in the new vendor listings. Respondents in all areas agree that the lack of property for sale is causing somewhat of a vicious cycle, as the limited choice available at present is deterring ‘would-be movers’ and therefore restricting new instructions. In the meantime, new buyer enquiring increased for the fourth consecutive month in succession at national level.

In spite of the steady and sustained improvement in demand, newly agreed sales were more or less unchanged at the national level in July. This backs up the idea that although there is interest from buyers, supply shortage is preventing transaction levels from rising significantly. However, areas such as Northern Ireland, Wales, West Midlands and the South West have seen a rise in recent months. In contrast, transactions decreased in the South East and Yorkshire, whilst remaining broadly low in London. In the near future, contributors still expect sales to gain momentum in the near term across all part of the UK.

Prices continue to be squeezed higher by increasing demand against a backdrop of contracting supply (average stock levels have declined by 20% since January). National house price inflation increased momentum for the sixth consecutive month and has now reached a pace that was last seen in July 2014. Prices are reported to be rising across the majority of areas with Northern Ireland, North West England and East Anglia witnessing the strongest momentum. The North East of England remains to be the sole exception, where prices have been reported to have fallen for the third consecutive month.

At the twelve month horizon, all areas of the UK are projected to see sizeable house price growth, with confidence most elevated in East Anglia and Northern Ireland.

Interestingly at headline level, respondents felt the following on current market valuations in their area:

Around or below fair value:

• Majority: 68%
• North East: 18%
• East Midlands: 16%

Overpriced:

• London: 60%
• South East: 54%

Too expensive:

• East Anglia: 42%

Over in lettings, tenants demand continues to rise whilst landlord instructions failed to keep pace once more. Consequently, rent is expected to increase across the UK with members in the West Midlands (4%), the South East (3.3%), East Anglia (3.2%) and London (3%) projecting the sharpest growth over the next 12 months.