The fall in stock levels is continuing to drive prices
- The inventories of properties within agent’s books continue to creep lower on the back of flat instructions
- Increase in price gains has grown in London and the South east, with only moderate increases elsewhere
- Activity seems to have remained firm throughout January, if not a little less than December
According to the RICS Residential Market Survey from January, the pattern of growth that begun towards the end of 2013 which displayed those enquiries from new buyers continued to increase. This has resulted in the new instructions remaining broadly unaffected. The strength of the demand is mirrored in the headline prices and net balance which for the 5th month in a row, has continued to improve month on month and exceed +50 – Last time we saw anything like this was back in 2002. Despite the fact we’re seeing positive recordings in all regions of the UK; there is still a divide across them. The South East of England and London have registered extremely high net balances of around +80 and +87. The North of England and Wales on the other hand have showed +12 and +21.
According to RICS, the price expectations are also being underpinned by the lack of stock on sale. This is reflected in the three month reading which shows its standing at +52 as opposed to the +60 that it was previously. The 12 month net balance however, has continued to climb to an all-time high of +76 which is impressive considering this series was launched only 4 years ago. Interestingly, there is an increasing conviction that we will see a growth continuing to rise in the medium term. Taking an average from contributors to the survey, we are expected to see prices rise by more than 6% nationally over the next 5 years which results in a 35% compound growth.
The latest array of results tells us that the inventory on the books of survey respondents has dropped to around 59 properties per branch on average in January, which is a small decrease compared to the 60.4 average properties for sale in December 2013; More significantly, this is the lowest reading we’ve seen in approximately 4.5 years. A number of respondents have predicted that we could see a rise over the coming months, however, it remains to be seen whether an increase, if at all, proves to be sufficient.
The more desired credit conditions hare having a large impact on buyer enquiries as we’re seeing a continued support which is resulting in a significantly improved environment for Finance and mortgages. January results have displayed that the average loan to value ratio continues to increase for both first time buyers and existing home owners. For the former, we’ve seen a positive increase in the ratio from 82% to around 86% within the last 12 months.
Looking at the above as a foundation, it isn’t surprising that the number of agreed sales is continuing to increase – Granted, this is at a more suitable pace as opposed to the previous 3 months.
Compared to December, the number of sales per surveyor was little changed, but does remain very close to its best level achieved in 2008. Bearing in mind the stock level drop, the sales to stock ratio actually increased slightly closer to 35% as opposed to the 34.5% in December 2013 and a 23% in January 2013.
Now that the sales market is beginning to gain a little more traction, the lettings market hasn’t seen as bigger impact. The latest quarterly numbers show that tenants are still continuing to creep upwards at a more significant rate than newer instructions. As a result of this, the expectations of a growth in renting are still looking promising.