House hunters are returning to the UK residential market after the June referendum, but may face a lack of purchase options as the supply of available homes remains restricted, according to RICS' latest residential market survey.
Across the UK, interest from prospective homebuyers increased for the second consecutive month with 10% more respondents reporting a rise in demand from buyers in October rather than a fall. Prices continue to rise, with 23% more respondents seeing growth, rather than a decline, up from a net balance of +18 in September.
London remains something of an the exception, recording an eighth consecutive monthly decline with 16% more respondents in the capital reporting a fall rather than rise in prices – this figure more closely reflects inner London rather than the outer boroughs, many of which are still seeing significant price growth.
More generally, the rise in prices has been fuelled by a continued fall in the number of new properties on the market, a trend that has continued for well over two years. Respondents reported a further slight decline in new instructions over the month and anecdotal evidence suggests that the tight supply conditions continue to be a very dominant feature of the market across the UK.
"The dire shortage of available housing across the UK is continuing to push prices upwards, regardless of the uncertainty linked to the ongoing discussions surrounding Brexit," said Simon Rubinsohn, RICS Chief Economist.
"We are only weeks away from the Autumn Statement and it will be interesting to see what measures – if any - the Chancellor will put in place to increase housing supply and create a more affordable market."
As activity recovers post-EU referendum, agreed sales rose marginally across the UK with 5% more chartered surveyors seeing activity rise rather than fall in October. Expectations for the months to come have also improved with a net balance of 25% of respondents forecasting a rise in transaction levels across the UK as a whole - all regions reflect this trend.
Projections for price growth over the next three months have also increased with 18% more respondents foreseeing a rise over the next three months rather than a fall. Price expectations are now positive in all areas of the UK over the near term except central London, where respondents predict prices will remain broadly flat in the near future. At the twelve month horizon, the picture remains broadly unchanged from September with contributors forecasting a rise rather than a fall in prices with once again the high-end London market the outlier.
In the lettings market, tenant demand picked up firmly in the three months to October with 29% more surveyors reporting a rise in enquiries, rather than a fall. Demand continues to outpace new supply in all areas apart from London, where for the second consecutive quarter, demand fell with a net balance of 15% of contributors seeing a decrease.
Sluggish demand in the capital is taking a toll on rent expectations and 12% more respondents predict a fall in rental values in the capital over the coming three months. However, at the national level, expectations for rental growth picked up firmly with 34% more respondents forecasting a rise rather than a fall in the months to come, up from 15% in the three months to June.
