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Housing market outlook most negative for two decades

Antonia Di Lorenzo
Written By:
Antonia Di Lorenzo

The UK housing market ended 2018 on a weak note, with enquiries, agreed sales and new instructions all declining in December, data showed.

Surveyors are expecting flat or negative sales across the UK for the next three months, according to the latest report from the Royal Institution of Chartered Surveyors (Rics).

The twelve-month outlook is a little more upbeat, suggesting that some of the near-term pessimism is linked to the lack of clarity around what form of departure the UK might make from the EU in March.

The report found that sales volumes dwindled in December, although beneath this national headline figure some areas of the UK saw a more positive trend, including East Anglia, Wales, the North East and Northern Ireland.

The headline net balance of -28% represents the poorest reading since the series was formed in 1999.

In terms of prices, the headline indicator slipped slightly deeper into negative territory during December, falling to -19% from -11% in November. This marks the fourth consecutive negative reading. Nevertheless, the UK-wide measure is still masking regional differences.

Lack of stock and affordability

Domestic issues related to lack of supply and affordability also continue to affect the market, with stock levels and buyer interest declining further in December.

New buyer inquiries fell for a fifth month in succession, with a net balance at -17% compared to -20% in November.

This decline in demand from buyers matched the deterioration in new instructions, which have now remained in negative territory for the last six months and have declined in 19 of the previous 24 months.

However, it is little surprise that stock levels on estate agents books remain close to record lows, currently standing at an average of just 42 properties per branch.

Furthermore, supply issues also remain evident in the lettings market, as landlord instructions also declined once again, rounding off a year in which they have fallen in all twelve months.

The view from Rics

Simon Rubinsohn, Rics chief economist, said that it is hardly a surprise with ongoing uncertainty about the path to Brexit dominating the news agenda, that even allowing for the normal patterns around the Christmas holidays, buyer interest in purchasing property in December was subdued.

He added: “This is also very clearly reflected in a worsening trend in near term sales expectations. Looking a little further out, there is some comfort provided by the suggestion that transactions nationally should stabilise as some of the fog lifts, but that moment feels a way off for many respondents to the survey.

“Meanwhile, it is hard to see developers stepping up the supply pipeline in this environment. Getting to the government’s 300,000 building target was never going to be easy but pushing up to anywhere near this figure will require significantly greater input from other delivery channels including local authorities taking advantage of their new-found freedom.”

Richard Pike, Phoebus software sales and marketing director, said: “The figures from UK Finance this morning show that people were taking the opportunity at the end of last year to get in before the effects of Brexit negotiations could really be felt. There were plenty of good deals for everyone either looking to move, buy or remortgage, and the numbers indicate that many took advantage.

“Now, of course, we come to the crux of negotiations, and into completely unknown territory. Today’s report from RICS paints a very gloomy picture and I have no doubt that most people will be erring on the side of caution in the coming months.”