RICS August Residential Market Survey
Price momentum firm but demand moderates further
- Price momentum remains strong at the headline level
- Buyer enquiries edge down for the second consecutive month
- Mixed sales picture emerging across the UK
The August RICS Residential Market Survey shows that price momentum remains strong at the headline level. This is despite agreed sales falling the first time since September 2012 and thesecond consecutive decline in new buyer enquiries. The slightly softer demand picture is noticeable across the majority of the English regions, while in Scotland and Northern Ireland the demand picture remains firmer.
Anecdotal evidence suggests that growing speculation regarding the timing of the first Bank Rate rise and increased rhetoric from policymakers regarding potential risks in the housing market may have had an impact on buyer confidence.
The change in tone is also partly related to the Mortgage Market Review (MMR) recommendations introduced in April. Again, evidence from members suggests that the impact of the MMR may have been twofold; both restricting finance to certain potential buyers and leading to a lengthening in transaction completion times for others. Feedback suggests that relative to the beginning of the year, transaction times appear to have lengthened by around 2-4 weeks. While lender caution is reported to be the primary cause of these delays, shortages of conveyancers and other skilled staff are also cited as issues.
While buyer enquiries have dipped slightly in recent months, price momentum still remains firm at the national level with the headline RICS price balance recording a value of 40. East Anglia and Northern Ireland recorded the strongest price gains over the period while price momentum in the London market has continued to soften. Although the London price balance of 9 is still indicative of mild price growth, it represents by far the slowest growth of any area covered by the survey and demonstrates a significant turnaround from the beginning of the year when the vast majority of respondents in the capital were reporting rising prices. Headline three month price expectations moderated again in August and while confidence in continued price growth over the twelve month horizon is firmer, respondents have nonetheless decreased their expectations for growth to 2.3% from 2.5% previously.
While expectations for sales growth at both the three and twelve month horizons have moderated since the introduction of the MMR, both remain firmly positive. Indeed, it is unclear at this stage how much of this softening in activity is transitory and may be resolved as market participants adapt to the new lending rules.
In the rental market, tenant demand continued to grow steadily across most areas while new instructions to let again decreased very slightly. Anecdotal evidence suggests that rental stocks in some regions may be being depleted due to some ‘accidental landlords’ leaving the market. Against this backdrop, rents are expected to continue edging upwards in the near term and to grow by an average of 2.3% over the coming 12 months.