Stagnating supply slows housing market, says RICS
The prediction comes despite a small increase in new buyer enquiries for the third month in a row, something RICS expects to continue in the coming months.
The headline RICS price balance, which measures surveyor opinion on pricing, came in at 30% for November – its highest reading since April. This demonstrates that a greater number of surveyors are seeing price increases than a decrease in most areas.
For the second consecutive month, the strongest growth was reported in the West Midlands and North West of England. In London, Wales and the North East of England, slightly more surveyors reported a fall rather than a rise in prices.
However, RICS said the downward momentum in London’s inner boroughs looks to have eased significantly relative to previous months. Demand at the aggregate level increased modestly once again during the month with 13% more surveyors reporting a rise in new buyer enquiries rather than a fall.
But while enquiries increased in most parts of the UK in November, this has been eroding available stock for sale and supply remains flat. There has been no increase in supply for nine consecutive months.
Agreed sales rose, with a net balance of 9% of contributors reporting growth over the month. This may be the highest reading since February, but it is still indicative of a very moderate rise in activity.
RICS chief economist Simon Rubinsohn said a key issue for the housing market is the slowdown in transaction activity since the Spring.
“Although there are some signs that the numbers may begin to edge upwards in the New Year, the combination of macro-uncertainty, the ongoing supply shortfall, with stock levels around historic lows, and the myriad of tax changes impacting on buyers suggest that any pick-up in activity will be relatively modest,” he said.
“This is significant, not just for the housing market itself, but also for the wider economy, given how much of consumer spending is tied in with home purchases.”
Stephen Smith, director of Legal & General Housing Partnerships, was more upbeat. “In spite of all the political upheavals that this year has experienced, the fundamentals of the UK economy and demand for housing continue to go from strength to strength,” he said.
“Although surveyors are expecting a slow start to 2017 due to a lack of housing supply, this is not a surprise and it will take time for the recent housing announcements from the Autumn Statement to kick in.”
Smith said the Government’s pledge to inject £1.4bn into the housing market means a brighter future for aspirational home owners. “These legislative changes, coupled with the promise of a Housing White Paper at the start of the New Year, will hopefully shape the future of the housing market for the better, and tackle this shortage of homes head on.”
RICS added that surveyors are broadly confident transaction levels and prices will rise over the next 12 months.
However, they are less confident when it comes to London’s pricing prospects – a net balance of 11% expect growth in the capital, compared with 40% overall. Tax changes are the chief impediment to transaction activity for larger London properties, which are expected to show the slowest growth.
In the lettings market, RICS said tenant demand continues to outpace supply across most areas and rent expectations remain firmly in positive territory, with 17% more respondents forecasting further growth rather than a fall.
The London rental market remains somewhat of an outlier with surveyors continuing to report a decline in tenant demand, a trend that has been visible for most of the last year, and rent expectations in negative territory for the fifth consecutive month.