Buyer demand dropped last month for the first time since March 2015, according to the latest RICS UK Residential Market Survey, although prices have continued to rise as supply is still coming up short.
The short supply situation is unlikely to change anytime soon, notes the RICS, which anticipates that prices will be pushed up despite short-term uncertainty.
The demand dip (22% more chartered surveyors reported a drop in demand in this survey compared to the last) can in large part be put down to an abnormally active stretch in advance of 1st April’s tax increases for buy-to-letters, but EU Referendum uncertainty is probably playing a significant part as well.
As the market continues to be hampered by uncertainty, sales are forecast to remain flat over the coming three months with the outlook in London significantly worse than other parts of the UK – 22% more respondents in London expect sales to fall over the next three months.
Despite the drop in demand from buyers prices have continued to rise, although at a more moderate pace across the UK in April, apart from central London which saw a modest decline and the North which saw prices remain flat.
In contrast to the short term issues, the longer term expectation is that house prices will continue to rise as the supply crisis remains. 8% more surveyors have reported a fall in new instructions in April with the lack of stock looking unlikely to ease in the short term.
Prices are forecast to rise across the whole of the UK over the next 12 months with 61% more chartered surveyors expecting prices to go up across England and Wales. Looking at the picture regionally, London has lower growth expectations over the coming year than the rest of the UK with prices likely to remain flat, but the outlook for prices remains positive in each part of the UK over the next five years with contributors envisaging growth of between 3% and 5.5% per annum.
Turning to the UK lettings market, surprisingly following the recent increase in demand from buy-to-let investors there has as yet been no noticeable increase in new landlord instructions.
Comments from surveyors suggest that recent policy changes towards the sector are leading to landlords reconsidering their positions in the market. As tenant demand increases, 22% more contributors have seen a rise rather than fall, this is more than likely to drive rents higher. Reflecting the lack stock of all tenures, rental growth is expected to accelerate to an average of 4.6% per annum (3 month average) over the course of the next five years.
Simon Rubinsohn, RICS Chief Economist: “Uncertainty is a word that features heavily in the feedback we are receiving from members responding to the survey and is contributing to the flatter trend in the latest data. More ominous is the expectation that both prices and rents will head materially higher over medium term despite existing affordability concerns with the supply pipeline continuing to fall short of household growth notwithstanding the various levers the government is pulling to try and drive development.”