Following the
General Election result, the UK housing market has seen a lift in sentiment,
according to the December 2019 RICS Residential Market Survey.
Sales expectations
have risen sharply, and a number of other key activity metrics have turned
positive for the first time in several months.
That said, this
change in activity levels is expected to lead to house price rises in the near
and longer term due to continued imbalance in supply.
In December, 17%
more survey respondents saw a rise rather than fall in enquiries from new
buyers (up from -5% in November) at the headline level across the UK.
Regionally, the majority of areas saw interest from new buyers increase, with
respondents in Wales and the North East in particular reporting solid growth.
Enquiries also rose in London and the South East, marking a noticeable
turnaround from the negative results in November.
Alongside a rise in
enquiries from buyers, the number of agreed sales edged up at the national
level, (+9% net balance). This is the first time since May 2019 that the number
of agreed sales has shown a positive result. Agreed sales in London
and East Anglia delivered amongst the strongest improvement in sentiment, (net
balances of +22% and +23% respectively), while sales reportedly weakened in
Northern Ireland and Scotland.
Sales expectations
for the next three months are also positive, for the third month running, with
+31% of respondents anticipating transactions will rise. This sentiment is
mirrored for sales prospects over the next twelve months, which have seen an
even greater improvement. A net balance of +66% of survey participants
predict that sales will rise in the year ahead (up from +35% previously). The
strongest net balances were returned in Wales and the South West, although all
regions are showing strong improvement.
Key findings:
- Sales expectations improve
noticeably – first time since May 2019 a positive result has been recorded
- Sales expectations for the
next 12 months rise to a net balance of +66% (from +35% in November)
- Enquiries from buyers rise,
as instructions also increase over the month
- House prices expected to rise
over the next three / twelve months
Sales expectations
in the UK housing market have risen sharply following the General Election
result.
While new
instructions picked up at the national level, a net balance of +9% of
contributors reported an increase, outside London and the South East, new sales
instructions were more or less flat rather than picking up to any degree.
With regards to
house prices, the survey’s headline net balance came in at -2% (compared to
-11% previously), signalling a broadly flat national trend for the time being.
Going forward, however, near term price expectations were revised higher in all
parts of the UK. This indicates a large shift across previously weakening
areas, such as London and the South East.
Back at the national
level, a net balance of +61% of survey participants see prices increasing at
the twelve month horizon (a rise from +33% last time). What’s more, the outlook
for house price inflation was adjusted higher right across the UK.
In the lettings
market, tenant demand (non-seasonally adjusted monthly series) picked-up
modestly over the survey period. Meanwhile, landlord instructions remained very
much in decline, with this indicator stuck in negative territory going all the
way back to 2016. Going forward, rents are expected to increase as a
consequence of the imbalance between rising demand and falling supply.
Simon Rubinsohn,
RICS Chief Economist, said: “The signals from the latest RICS survey provides
further evidence that the housing market is seeing some benefit from the
greater clarity provided by the decisive election outcome.
"Whether the
improvement in sentiment can be sustained remains to be seen given that there
is so much work to be done over the course of this year in determining the
nature of the eventual Brexit deal. However, the sales expectations indicators
clearly point to the prospect of more upbeat trend in transactions emerging
with potential purchasers being more comfortable in following through on
initial enquiries.
“The ongoing lack of
stock on the market remains a potential drag on a meaningful uplift in activity
although the very modest increase in new instructions in December is an early
hopeful sign.
"Given that
affordability remains a key issue in many parts of the country, the shift in
the mood-music on prices is a concern with even London expectations pointing to
a reversal of course both over the coming months and looking further out. This
highlights the critical importance of the government addressing the challenge
around housing supply particularly with the gradual phasing out of the Help to
Buy incentive.”
