2019 off to a slow start RICS UK Residential Market Survey, January 2019

The year is off to a slow start, with the latest RICS UK Residential Market Survey showing a deteriorating backdrop, as enquiries, sales and new instructions all fall further in January.

In the near term, contributors sense little prospect of a turnaround, as concerns over the potential impact of Brexit, alongside affordability constraints continue to cause buyers and sellers to hesitate. That said, expectations at the twelve month horizon are modestly positive.

During January, new buyer enquiries fell again at the headline level marking the sixth successive monthly decline. What’s more, demand declined 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 number of new properties being listed on the sales market also deteriorated, with the net balance reading of -25% the weakest since July 2016.

Rounding off a subdued month for market activity, agreed sales also fell further, with the pace of decline seemingly gathering momentum compared to December.

Looking ahead, sales expectations for the coming three months remain downbeat, both at the national level and across most parts of the UK with expectations negative in eleven of the twelve regions/countries covered. The outlook over the next twelve months is stronger, however, as a headline net balance of +16% of contributors are expecting sales to rise.

Prices also continued to slip, as the headline price indicator declined for the fourth month in succession, with the net balance easing to -22%. When broken down, London and the South East continue to display the weakest readings, followed by East Anglia and the South West. In these regions the strong price growth over the past six years has left affordability looking stretched, with the high prices a key factor hampering demand. Elsewhere, prices continue to rise in Northern Ireland and Scotland.

Across the lettings market, tenant demand rose modestly in the three months to January (seasonally adjusted series). It has now picked-up in each of the last three quarters. Nevertheless, nationally new landlord instructions continue to dwindle, remaining in negative territory for an eleventh successive quarter. Respondents expect rents to rise by roughly 2% over the next twelve months, and at the five year horizon, averaging 3% per annum.

Simon Rubinsohn, RICS chief economist, said: “Although some contributors to the survey have taken comfort from a better start to the year than anticipated, a larger proportion are continuing to find the market a difficult one in which to do business. Resolution of the Brexit negotiations is widely seen as critical to encouraging potential buyers back into the market although whether that will be sufficient in London and parts of the South East where affordability remains stretched and the tax changes are most penal remains to be seen.

“Meanwhile, the lettings market is continuing to see instructions fall away as investors respond to the emerging fiscal and regulatory landscape. This is resulting in feedback consistent with further increases in rents across the country, to a greater or lesser degree, over the next twelve months.”