Brexit impasse continues to challenge the housing market

The housing market remained subdued in March, a picture that has been evident in the sales market for several months now, according to our latest UK Residential Market Survey.

Looking ahead, the lack of momentum is likely to continue for a while longer.

In March, enquiries from new buyers saw the eighth negative reading in a row, with 27% of respondents seeing a fall in buyer demand. Demand fell across all parts of the UK in March.

As buyer interest declines, respondents reported a net balance fall of -24% in agreed sales. This is consistent with an expected drop in the HMRC measure of transactions – currently operating at around 100k per month - over the coming months (reflecting the RICS series role as a lead indicator). Beyond, there is a little more optimism, with sales anticipated to rise over the course of the next year.

The ongoing decline in new instructions and new property coming on to the market continues, having become progressively weaker in each of the past four surveys, falling from the net balance of -20% in December, to -30% in March. As a result, despite reduction in agreed sales, average stock levels on estate agents' books remain at 42 properties per branch.

Looking at prices, 24% of respondents saw a decline rather than rise in prices at a headline level in March. This measure was -27% (net balance) in February and, although this does end a streak of eight consecutive months of declining responses, the measure (as a lead indicator) is still pointing to a modest fall in house prices at the national level over the next couple of quarters.

London and the South East continue to display the weakest sentiment regarding prices, with Scotland and Northern Ireland the only parts of the UK to have seen sustained price growth on a consistent basis, over the past two months. Looking ahead, at the national level, 15% more respondents anticipate house prices will be higher in twelve months' time.

In the lettings market, demand from tenants continued to rise for a third successive month (non-seasonally adjusted data), while landlord instructions slipped further. On the back of this, contributors are pencilling in rental growth of approximately 2% over the coming twelve months.

Simon Rubinsohn, RICS Chief Economist, said: "Brexit remains a major drag on activity in the market with anecdotal evidence pointing to potential buyers being reluctant to commit in the face of the heightened sense of uncertainty. Whether any deal provides the shift in mood music envisaged by many respondents to the survey remains to be seen but as things stand, there is little encouragement to be drawn from key RICS lead indicators. We expect transactions to decline on this basis.

"Arguably more significant still are the signs that developers are continuing to adopt a more cautious stance with the trend in new residential starts now flatlining. Against this backdrop, there is little possibility of delivering the uplift in supply necessary to address the ongoing housing crisis."