Confidence is starting to recover following the immediate reaction to the EU Referendum, as the UK residential market experiences a slight upturn in August, according to the latest UK Residential Market Survey.
The August 2016 survey shows a pick-up in confidence, following a significant drop in activity and price expectations in the wake of the EU vote. At the national level, both prices and sales are expected to rise over both the three and twelve month horizons as activity in the market stabilises.
During August, 12% more respondents nationally reported an increase in prices (up from +5% in July). Although this reverses a run of five consecutive surveys in which the net balance has decelerated (from a high of 50% in February), it is still the second weakest reading over the past eighteen months.
In London, the price net balance remained in negative territory for a sixth consecutive month, with 30% more respondents noting a fall in prices over the period, as opposed a rise. By way of contrast, prices increased in most other parts of the UK.
Looking ahead, price expectations over the next three months nationally moved into positive territory for the first time since April with 10% more respondents now anticipating an increase over the period. This slightly stronger picture is also reflected in price expectations for the coming year with modest increases anticipated in most parts of the country away from the capital.
Following a couple of months in which sales declined sharply in the aftermath of the referendum, volumes stabilised during August, as the agreed sales indicator improved to zero from -32%. That said, sales still appear to be falling in some parts of the country. Going forward, sales expectations improved noticeably, posting the strongest reading since February and furthermore, sales projections at 12 months have now climbed out of negative territory across all areas of the UK.
A key factor in supporting the rising prices is the continued shortage of stock for sale. This looks set to continue as new instructions declined once more during August. As a result, stock on estate agents books slipped for the third month in a row and is now approaching the record low posted in December last year.
New buyer demand also decreased slightly across the UK as a whole, although the pace of this decline has eased significantly. A net balance of -7% more chartered surveyors have reported a fall in demand in August (up from a net balance of -25% in July).
Meanwhile, two-thirds of SME house builders are yet to see any significant changes to their project pipelines in the wake of Brexit, new research from the Federation of Master Builders (FMB) has revealed.
The survey - which is the first to be conducted among SME house builders since the EU referendum - found that 69% of firms are yet to see any changes to their businesses resulting from the referendum.
Brian Berry, Chief Executive of the FMB, said: “SME house builders are crucial to achieving the Government's ambition to build one million homes by 2020, so Ministers will no doubt be bolstered by these initial post-Brexit findings. Despite some fears that the referendum result might put new projects on hold, the overwhelming majority of SME house builders are reporting that no decisions have yet been influenced by the referendum result. This matches the view expressed by many small construction firms that so far, the market appears to suggest that it's ‘business as usual’. Only one quarter of small house builders have seen any negative effect on their projects from the Brexit decision, and most of these are the result of delayed decisions rather than actual project cancellations.
“Brexit aside, we should not paint an overly rosy picture of the situation facing SME house builders. The barriers to building that existed prior to the referendum are still hindering delivery, and as the housing crisis continues to be a pressing concern, the need to empower smaller developers must be a priority for May's Government. To this end, it's worth noting that more than half of SME house builders state that the removal of unnecessary red tape should be the most important consideration for the new Government as they begin to negotiate the UK’s exit from the EU.
“More than one fifth of SME house builders are demanding that the Government finds a way of ensuring a sufficient number of skilled tradespeople from the EU are still able to enter the UK. The Prime Minister insists that freedom of movement is now over and if this is not likely to be replaced by a points-based system - as reported this week - crucial sectors like the construction industry must be reassured that whatever system does replace it, it is flexible enough to respond to our needs. Otherwise, the construction skills shortage will be exacerbated and ultimately, it will become a major barrier to delivering the housing and infrastructure projects we so desperately need."
