Demand Supply Imbalance Continues to Push Prices Higher
- Supply contracted again in April as demand continued to grow
- Prices expectations remain firm in all parts of the UK
- Instructions to let property remain broadly flat for the third consecutive quarter, supporting rental expectations
April’s RICS Survey has shown a continuation of the broad pattern that began in the second half of last year with house prices remaining on a firmly upward trend. The imbalance between demand and supply continues to be a key driver of price growth with new buyer enquiries remaining firmly positive at the headline level while new instructions contracted slightly for the fourth consecutive month.
This dearth of new instructions appears quite widespread with nine out of twelve regions monitored seeing a decline in the number of new sellers coming to market over the course of the April. Growth in new buyer enquiries remains positive across all regions of the UK. While prices are now rising across all regions, East Anglia and the South East are reported to have experienced the broadest rises over the last 3 months.
This trend in price growth looks set to continue with surveyors expecting prices to rise across all regions over the coming 12 months. Longer term price expectations also remain almost unchanged with respondents envisaging average price growth of 6% per annum over the coming 5 years.
Agreed sales continue to rise. As would be expected, this is also a trend that is common to all regions and respondents remain confident in further growth in activity levels with the 3 and 12 month sales expectations series standing at 33 and 60 respectively.
The growth in demand that is feeding this stronger market is being supported by favourable credit conditions that have increased the supply of mortgage finance. The more accommodative lending environment is benefiting all buyer types with surveyors reporting ‘perceived’ Loan-to-Value ratios to be rising across the spectrum of borrowers with first time buyers experiencing the largest increase in Loan-to-Value’s over the year to April (from 82% to 86% on a three month average basis). Loan-to-Value for existing owner occupiers and buy to let borrowers, on the other hand, have increased by between 1-2% over the year and stand at 78% and 74% respectively.
The average number of sales per surveyor crept up marginally in April to a post-crisis high while the average number of stocks on surveyors’ books decreased slightly. This pushed the sales-to-stock ratio up marginally to 38%; the second highest post-crisis reading.
The rental market has grown more slowly over the last three quarters as the sales market has rebounded. However, growth is still positive in all but the North West and East Anglia regions. New landlord instructions have remained flat at the headline level since mid-2013 and this has kept the rent expectations series in positive territory. Respondents now expect growth in rental prices of just below 2% over the coming 12 months.