Further Weaknesses Expected in the Housing Market over the Short-Term

Further weaknesses are expected in the UK housing market over the short-term, according to responses to the January 2019 UK Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS).

The results continue to signal a subdued backdrop, with enquiries, sales and new instructions all falling further over the month.

In the near-term, contributors to the survey sense little prospect of a turnaround, as concerns over the potential impact of Brexit continue to cause hesitancy, alongside affordability constraints in parts of the country. 

That said, while shorter-term sentiment remains downbeat, expectations at the 12-month outlook are modestly positive.

Housing demand

During January, new buyer enquiries declined yet again, marking the sixth successive monthly decrease. What’s more, demand softened to some degree across virtually all parts of the UK. Scotland was a slight exception, but, even here, the trend was only flat.

Alongside weakening demand, the flow of properties being listed onto the sales market also deteriorated, with the net balance reading of -25% the poorest since July 2016.

Moreover, the pipeline for sales instructions going forward still appears weak, evidenced by survey participants continuing to report that the number of appraisals is down annually.

Property sales

Rounding off a subdued month for housing market activity, agreed property sales also fell further, with the pace of decline seemingly gathering momentum compared to the December survey. 

Meanwhile, the average time taken to sell a property, from listing to completion, continued to lengthen, reaching 19.4 weeks (the longest since this series was introduced back in 2017).

Looking ahead, sales expectations for the coming three months remain downbeat, both at the national level and across most of the UK. Indeed, the headline net balance came in at -32% (which is down from -28% in December), while expectations are negative across 11 of the 12 regions/countries covered in the report. 

The outlook further down the line seems a little stronger, however, as a headline net balance of +16% of contributors are expecting sales to rise over the next 12 months (albeit from a lower level).

House prices

The headline price indicator softened for the fourth consecutive month, with the net balance slipping to -22%, from -19% previously.

When broken down, London and the South East continue to display the weakest readings, while pricing sentiment also remains negative in East Anglia and the South West. In each instance, strong price growth over the past six years as a whole has left measures of affordability looking stretched, with high prices therefore a key factor hampering demand at present.

Elsewhere, although house price growth seems to have lost at least some impetus in most English regions over the last six months or so, prices continue to rise firmly in Northern Ireland and Scotland.

In fact, both Northern Ireland and Scotland also display the strongest price expectations for the coming 12 months, followed by the North West and Wales. By way of contrast, respondents in London still see house prices falling at the 12-month outlook.

That said, five-year projections for house prices across the capital have risen above the national average over recent months (growth of 2.2% per year expected nationally, compared to 2.6% for London).

Lettings market

Across the lettings market, tenant demand increased modestly in the three months to January. As such, demand has now picked up in each of the last three quarters, following a flatter trend in the early part of 2018.

Nevertheless, new landlord instructions continue to dwindle, with the survey’s lettings supply indicator remaining in negative territory for an 11^thconsecutive quarter.

Respondents continue to expect rent prices to rise by roughly 2% over the next 12 months, while growth is forecast to accelerate slightly over the next five years, averaging 3% per year.