In the October survey, 10% more respondents saw a fall in prices at the headline level. (-2% net balance previously). This is the weakest reading since September 2012, and mostly stems from London and the South East, with the price balance in the South East deteriorating during October. East Anglia, the South West and the North East also saw negative price balances, but prices continue to rise in other parts of the UK, with the strongest growth in Northern Ireland and Scotland.
Looking ahead, three month price expectations are also slightly negative at a national level, and the national outlook for the year ahead now broadly flat.
For those looking for their first properties, the market is relatively steady price wise. Reporting on properties listed at up to £500k and below, a slim majority of survey participants reported that sales prices have been at least level with ask prices. Nevertheless, a still noteworthy 34% stated sales prices were coming in up to 5% below. Homes in the highest price brackets are noticeably below asking price.
The weaker trend in prices is being driven by the lack of demand from new buyers, which is in part a result of heightened political uncertainty, ongoing affordability pressures, a modest upward move in interest rates and a lack of fresh stock coming onto the market. In October, 14% more respondents reported a fall in buyer interest, which is the third report in a row in which demand has deteriorated (at a UK level).
In terms of new instructions, and the supply pipeline, virtually all UK regions saw a further decline as average stock remains very close to an all-time low. Furthermore, there appears little chance of any meaningful turnaround, as a net balance of 30% of respondents reported the number of appraisals to be down on year on year basis.
Given these conditions, it is little surprise that sales remain subdued, with the third consecutive monthly decline in transactions. In fact, sales were reported to be either flat or negative across eleven of the twelve UK regions/countries during October.
In the lettings market, the quarterly (seasonally adjusted) data points to an improvement in tenant demand during the three months to October. Alongside this however, landlord instructions continued to fall, remaining negative for a tenth straight quarter (the longest negative stretch since this series was formed in 1999). On the back of this, rents are expected to rise over the coming months albeit only modestly.
Simon Rubinsohn, RICS chief economist, commented:
“Although the tone of much of the newsflow surrounding the housing market remains downbeat, this continues to disproportionately reflect developments in the south and east of England with the picture remaining rather more resilient in many other parts of the country. Uncertainty about the economic outlook on the back of the never-ending Brexit negotiations appears a key drag on sentiment according to respondents to the survey.
“Meanwhile, the announcement of the extension of Help to Buy, albeit in a narrower format, should continue to underpin the new build market in the near term. Whether it, alongside other measures recently announced including the lifting of the HRA cap, is sufficient to drive housing starts up to the government’s 300,000 target over the coming years remains to be seen.”