The UK housing market continues to lack momentum in September, as demand from new buyers and sales fall again and the shift in interest rate expectations contributes to buyer caution in a slowing market, according to the September RICS UK Residential Market Survey.

Row of terraced houses in Camden, London

Focus on other regions:

Survey in brief

  • Buyer enquiries and sales balances slip back a little further in September.
  • National price balance still marginally positive, but London and the South East return weaker readings.
  • Expectations point to a subdued near-term outlook for both prices and sales.

No new buyers causing a fall in sales

This month, surveyors reported a decline in both sales and new buyer enquiries with sentiment now flatter than any point since last summer’s referendum result.  In September, 20% more respondents noted a fall rather than rise in demand from would-be buyers, extending the run of negative readings into a sixth month.

Alongside this, 15% more respondents reported a fall in agreed sales rather than a rise which is the lowest since July 2016.

When broken down regionally, London and the South East were at the forefront of the decline in sales, but weakness in transactions was widespread during September. In fact, only Wales and the South West were cited to have seen an increase in sales, while all other parts of the UK saw sales flat.

Near-term sales expectations

Looking ahead over the next three months, there is little change anticipated in national sales activity, with expectations slipping to -1% (from +7% previously). Likewise, the twelve-month outlook is also flat at the national level, although respondents are a little more optimistic in Wales, Scotland and Northern Ireland.

As sales and new buyers decline, new instructions to sell were more or less stable for the second report running, having declined continuously for the past eighteen months. Consequently, average stock levels on estate agents' books held broadly steady (albeit near record lows), at 43.3.

House prices continue to rise

Prices also held steady in September at the national level, with 6% more respondents seeing a rise in prices demonstrating a marginal increase. Looking across the regions, London remains firmly negative, while the price balance in the South East also remains negative (but to a lesser extent than London) for a fourth consecutive month. Both of these regions continue to display the highest proportion of respondents viewing the market to be overpriced, compared to all other parts of the UK.

Moving away from the capital, East Anglia and the North East also saw prices fall in September with the rest of the UK continuing to see house prices rise. Looking ahead to the next three months, sentiment turned negative with 8% more respondents expecting prices to fall at a national level; primarily being driven by the cautious outlook from respondents in London and the South East. That said, Northern Ireland and Scotland are now the only two areas in which contributors are confident that prices will rise in the near term. Despite some regional discrepancies for the coming quarter, respondents expect prices to rise, in all regions apart from London, by this point in 2018.

Rents set to rise

Looking at the lettings market, interest from prospective tenants edged up during September (non-seasonally adjusted), with 10% more respondents noting a rise, rather than a fall, in demand. Landlord instructions declined alongside this, meaning listings have not seen any growth going back fourteen months. Rental expectations are somewhat subdued in the near term, with contributors anticipating only a marginal rise on a UK-wide basis.

Focus on Wales

Main findings:

  • The headline price balance for Wales was +51% in the latest survey, meaning that 51% more surveyors said that prices rose in the past three months than those who said they fell.
  • The price expectations balance, at +3%, remains in positive territory, as does the sales expectations balance at +23%.
  • The new instructions to sell balance was at +43%, suggesting that there was an increase in the number of new properties coming onto the market. Meanwhile, new buyer enquiries increased according to a net balance of +35% of Welsh surveyors, and the newly agreed sales balance increased to +34%.

House prices in Wales continued to rise strongly in September. The market was busy during the month, with new buyer enquiries and newly agreed sales, alongside new instructions to sell, growing firmly too.

Welsh surveyors also remain relatively upbeat about the prospects for the market, with respondents, on balance, pointing to price rises and an increase in sales activity over the next three months.

The market has been generally busy with new listings, viewings and offers, and surveyors expect that to continue. But there has been some easing back from the past couple of months when there was more of a rush to buy. Buyers have more mortgage choice now than they did and it appears that they are taking more time to make decisions.
Following a very busy few months, there are some signs that the market is slowing marginally. Supply remains a problem.

Comments (1)

  1. The view from RICS

    It was always questionable to talk about the housing market as a single entity but the stark divergence in key readings from the latest RICS survey demonstrates in the clearest possible terms just how important the regional narrative is at the present time. In part, this is a reflection of affordability constraints hitting the higher priced segments of the market. It is perhaps also indicative of a shift in economic momentum in the face of the increasing possibility of the first hike in base rates in over ten years.

    That said, we are continuing to see evidence of shortage of stock both in the new build and second-hand market. And despite the announcements at the recent Conservative Party conference, it is hard to envisage this changing any time soon. Against such a backdrop, prices in general are likely to remain elevated and indeed, as the survey indicates, continues to rise over the medium term in most parts of the country.

    Simon Rubinsohn

    Simon Rubinsohn, RICS Chief Economist 10 October at 16:51PM

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