19th Feb 2019 RICS UK Residential Market Survey: January 2019

Short-term indicators point to further weakness

The January 2019 Royal Institution of Chartered Surveyors’ (RICS) UK Residential Market Survey results continue to signal a subdued backdrop, with enquiries, sales and new instructions all falling further over the month. In the near term, contributors sense little prospect of a turnaround, as concerns over the potential impact of Brexit continue to cause hesitancy, alongside affordability constraints in parts of the country. That said, while shorter-term sentiment remains downbeat, expectations at the twelve month horizon are modestly positive.

• Activity measures for both buyers and sellers continue to slip
• Price balance softens again at the national level, led by London and the South East
• Lettings market faring better, with demand rising modestly

During January, new buyer enquiries fell again at the headline level (on a seasonally adjusted basis), marking the sixth successive monthly decline. What’s more, demand softened to some degree across virtually all parts of the UK. Scotland was a slight exception, but even here the trend was only flat. Alongside weakening demand, the flow of properties being listed on the sales market also deteriorated, with the net balance reading of -25% the poorest since July 2016. Moreover, the pipeline for sales instructions going forward still appears weak, evidenced by survey participants continuing to report the number of appraisals being down on an annual comparison.
Rounding off a subdued month for market activity, agreed sales also fell further, with the pace of decline seemingly gathering momentum compared to the December results. Meanwhile, the average time taken to sell a property, from listing to completion, continued to lengthen, reaching 19.4 weeks (the longest since this series was introduced back in 2017).
Looking ahead, sales expectations for the coming three months remain downbeat, both at the national level and across most parts of the UK. Indeed, the headline net balance came in at -32% (down from -28% last month), while expectations are negative across eleven of the twelve regions/countries covered in the report. The outlook further down the line seems a little stronger, however, as a headline net balance of +16% of contributors are expecting sales to rise over the twelve month time-frame (albeit from a lower level).
The headline price indicator softened for the fourth month in succession, with the net balance slipping to -22%, from -19% previously. When broken down, London and the South East continue to display the weakest readings, while pricing sentiment also remains negative in East Anglia and the South West. In each instance, strong price growth over the past six years as a whole has left measures of affordability looking stretched, with high prices therefore a key factor hampering demand at present. Elsewhere, although house price inflation seems to have lost at least some impetus in most English regions over the past six months or so, prices continue to rise firmly in Northern Ireland and Scotland.
In fact, both Northern Ireland and Scotland also display the strongest price expectations for the coming twelve months, followed by the North West of England and Wales. By way of contrast, contributors in London still see house prices falling at the twelve month horizon. That said, five year projections for house prices across the capital (viewed as a three month average) have risen above the national average over recent months (growth of 2.2% per annum expected nationally compared to 2.6% for London).
Across the lettings market, tenant demand rose modestly in the three months to January (seasonally adjusted series). As such, demand has now picked-up in each of the last three quarters, following a flatter trend in the early part of 2018. Nevertheless, new landlord instructions continue to dwindle, with the survey’s lettings supply indicator remaining in negative territory for an eleventh successive quarter.
Respondents continue to expect rents to rise by roughly 2% over the next twelve months, while growth is seen accelerating slightly at the five year horizon, averaging 3% per annum.

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