June 2015: Residential Market Survey
Demand see further moderate rise while price momentum accelerate- RICS
- Buyer enquires increase moderately across the majority of areas
- Price momentum continues to rise and expectations strengthen
- New instructions remain in short supply, with respondents seeing a slight fall over the month
The June RICS Residential Market Survey shows a further rising increase in price growth with the headline price balance hitting an eleven month high of 40. House prices are reported to be rising in the majority of areas in the UK, with N. Ireland and East Anglia seeing particularly firm momentum throughout June. This increase in growth was a further modest rise in demand across most parts of the UK alongside yet another decrease in the level of new instructions.
With mortgage rates still near record lows and labours’ market strengthening, this moderate increase in demand is no real surprise. Although the most recent mortgage approvals data for May 2015 shows a 4.7% fall compared to the April 2015 figure, this is more than likely just a reflection from the sharp rise in previous months.
New stock supply to the market decreased again in June with the headline RICS New Instructions balance remaining in negative territory for the fifth month in a row at -14. Costs, such as stamp duty, are making home improvement work, like extensions, more financially appealing than moving home. There is some consensus that the shortage of stock is, to some extent, self-perpetuating as it acts as a deterrent to new vendors entering the market due to the reduced choice on offer for their next purchase.
Regardless of the lack of new supply, the RICS Agreed Sales balance showed a further marginal increase in transactions throughout June with the headline balance unchanged at 5. This figure hides significant variation across areas with the most consistent feature of the data over the last year being the sustained contraction in activity in London and the South East and the persistent increase in N. Ireland.
The outlook for prices strengthened again in June with respondents in all areas now expecting a rise at both the three and twelve month horizons. A net balance of 41% of respondents foresee prices rising in the coming three months while the twelve month expectations series reached a 15 month high of 75. Contributors, on average, envision prices rising by just over 3% in the next year with price growth increasing thereafter to an average of 4.8% per year over the coming 5 years.
With regards to the lettings market, tenant demand continues to rise, but a more reasonable pace, with the headline demand net balance coming in at 28. New instructions for rentals remained largely unchanged at -3. This now marks the eighteenth consecutive month that demand has outweighed supply, pushing the three month rent expectations net balance to 38%. Respondents expect rental values to rise by 3% over the coming year and by an average of 4.8% per year over each of the next 5 years.