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8th Feb 2018 RICS UK Residential Market Survey: January 2018 – Momentum still soft to start the year

• Enquiries, sales and instructions series remain negative
• Prices edge higher at the national level but continue to decline in some parts of the country
• More expensive tiers of the market still experiencing tougher conditions

The January 2018 Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey results show the year starting off in a very similar vein to the closing stages of 2017. New buyer enquiries, instructions and sales all continue to drift lower (in net balance terms), while near term expectations point to a flat outturn for activity in the coming months. Having said that, there is a little more optimism regarding the twelve month sales outlook which is now at least modestly positive in virtually all parts of the country.

For a tenth month in succession, new buyer enquiries declined at the headline level, with a net balance of -11% of respondents reporting a fall. Similarly, newly agreed sales also slipped, extending a run of negative readings for this indicator stretching back to last February. Going forward, a relatively stable sales trend is expected to emerge in the near term, while respondents envisage sales picking up over the next twelve months as a whole, albeit the net balance of +33% is relatively modest when viewed in a historical context.

The lack of new instructions coming to market continues to impede activity and this has shown no sign of turning in recent months. Indeed, at -17%, the January net balance was the weakest since May 2017, pointing to a further deterioration in the flow of fresh listings for a fifth successive report. Unsurprisingly, the average number of properties on estate agents’ books continued to slip back towards the record low levels seen around the middle of last year. The pipeline for instructions going forward does not appear to be much stronger either, with 10% more respondents noting the number of valuations undertaken over the month was below the equivalent period of last year.

The national price balance returned a reading of +8% in January, unmoved from the previous survey. This measure now suggests, at the national level, prices have resumed on a modest growth trajectory in each of the past two months. Nevertheless, regional trends continue to differ significantly from the headline average. Indeed, the price gauge in London remains comfortably in negative territory, while falling prices were also reported across the South East, East Anglia and the North East (albeit all to a much lesser extent than in capital). Conversely, the North West of England, Northern Ireland and Wales posted the strongest price growth (in net balance terms) compared to all other parts of the UK.

Survey feedback continues highlight more expensive tiers of the market to be experiencing particularly challenging conditions. Indeed, 67% of respondents noted sales prices coming in below asking prices for properties marketed at £1 million+. The most favoured response (34%) was that prices were between 5% and 10% below. That said, back in October, 71% of contributors reported sales prices were coming in weaker (relative to asking prices), suggesting that the disparity has not worsened.

For properties listed between £1million and £500k, 56% of respondents cited sales prices coming in below asking (compared to 62% in October), with 41% saying prices achieved were up to 5% below. Finally, for properties marketed at up to £500k, the majority of contributors (58%) noted sales prices were coming in at the same level as asking prices or slightly above, although a still significant 42% said they were below.

With regards to the near term outlook for prices, three month expectations remain flat at the headline level, pointing to the pace of growth potentially easing in a number of areas. However, further out, at the twelve month horizon, expectations are positive in eleven of the twelve regions/countries covered by the survey. London was again the exception, although the net balance of respondents anticipating further declines in the capital at least turned less negative, moving from -41% to -21% (the least negative in six months).

In the lettings market, tenant demand edged up in the three months to January (seasonally adjusted series), although momentum remains only modest. Landlord instructions fell back slightly once more, with this imbalance producing moderately positive near term rental growth expectations.

The regional picture remains varied; expectations are still negative in London, although to a smaller degree than any other quarter since 2016. Meanwhile, rents are anticipated to see little change in the South East on the same basis. Over the next twelve months however, rental projections are slightly positive across both of these areas.