After the release of the latest UK Residential Market Survey, we take a closer look at the markets in Northern Ireland, Scotland and Wales.

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Surveys in brief

  • Northern Ireland house prices rising but sentiment turns more cautious
  • Scottish housing market activity flat, but prices rise as demand exceeds supply
  • Welsh housing market activity increases ahead of tax change

Northern Ireland

Northern Ireland house prices rose in February but sentiment surrounding the market is becoming more cautious according to the latest RICS (Royal Institution of Chartered Surveyors) and Ulster Bank Residential Market Survey.

A net balance of 35% of Northern Ireland surveyors said that prices rose in the February survey, but this had reduced slightly from January.

Respondents also indicated that new buyer enquiries eased back slightly last month - albeit that the three-month average is upwards - and expectations amongst surveyors for sales activity in the three months ahead lowered, with the balance for sales expectations now lower than at any time in the past five years.

However, there is still little evidence of new instructions to sell picking up, which points to a continuing lack of supply in the market and the likelihood that upward pressure on prices will remain.

Surveyors appear to be becoming more cautious about the market, perhaps based on some of the recent noise around the border and Brexit, as well the expectation that the Bank of England will raise interest rates. But this appears to be less the case regarding prices than sales activity. We’ve seen an ongoing shortage of properties coming onto the market for some time, and this doesn’t appear to have changed in the latest survey. This lack of supply will likely support current price levels and indeed potentially push prices higher in the months ahead. It also remains to be seen if the more cautious sentiment in relation to activity is sustained, or is just a short-term reaction to the recent news flow.
The latest Council of Mortgage Lenders data showed that first time buyer, home mover and homeowner mortgage lending all rose year-on-year in the fourth quarter of 2017, and our own experience at Ulster Bank suggests that this trend has continued into Q1 2018. There are no doubt challenges for the market ahead – not least the lack of supply – but in our experience, owning their own home or moving house are still key goals for many people in Northern Ireland and this is likely to remain the case.

Scotland

Housing market activity in Scotland was flat in February as a shortage of properties becoming available for sale continued to result in an increasing number of potential new buyers being thwarted, according to the latest RICS (Royal Institution of Chartered Surveyors) Residential Market Survey.

The number of properties coming onto the market (instructions to sell) failed to increase again in February, according to the survey, continuing a constrained supply trend that has been evident since 2015. As a result, newly agreed sales were flat last month, despite a rising number of new buyer enquiries.

Due to this gap between demand and availability, average house prices rose again, according to respondents, with a net balance of +31% of Scottish surveyors reporting increased values in the latest survey. This was significantly above the UK average and one of the highest readings of the UK nations and regions.

Encouragingly though, surveyors in Scotland are optimistic about the short-term outlook for activity in the market as we move into the spring months. A net balance of +39% of respondents expect the number of sales to increase in the three months ahead, from their low base, with anecdotal evidence suggesting that surveyors expect more potential vendors to bring their properties to the market when the weather improves.

Surveyors have continued to report that a lack of supply is both constraining activity in the market and leading to prices being pushed upwards. However, looking ahead, there is an anticipation that this situation will improve in the spring months, with more properties becoming available and the backlog of potential buyers potentially easing. The expectation is that if the supply side improves, activity should increase and the upward pressure on prices should ease somewhat.

Wales

Wales continues to outperform the subdued UK housing market with prices and demand rising again, according to the latest RICS (Royal Institution of Chartered Surveyors) Residential Market Survey.

A net balance of +42% of Welsh respondents said that house prices rose in February, higher than any other UK region and well above the flat picture being reported for the UK as a whole.

And it was a similar picture regarding newly agreed sales, with a net balance of 22% of Welsh respondents saying they were up last month, whilst other regions said they were broadly flat or falling.

Welsh surveyors also remain the UK’s most optimistic regarding what will happen to prices in the three months ahead. A net balance of +39% of Welsh respondents anticipate that prices will increase in the March to May period, whilst a net balance of +19% expect sales volumes to do the same.

Anecdotally, surveyors have suggested that the replacement of Stamp Duty Land Tax with the new Land Transaction Tax (LTT) from the start of April has led to some sales in the middle to upper price brackets being fast-tracked through to complete ahead of the end of March.

We are still seeing a shortage of instruction across prices levels, which is one of the factors pushing up prices. On the other hand, we see evidence of some purchasers in the middle to upper tiers of the market seeking to fast track their purchase ahead of the change to LTT, perhaps explaining the uptick in newly agreed sales.

Comments (1)

  1. The view from RICS

    Commenting on Wales: With the impending changes to the tax regime coming into force in April, there is little surprise that housing activity has increased; it would be fair to assume that buyers looking to the middle to upper price brackets are trying to squeeze in a house purchase before their tax liability increases.

    We know this having experienced a similar pattern in Scotland before the Land and Building Transaction Tax (LBTT) was introduced as a replacement for SDLT in April 2015. Indeed, the introduction of LBTT and Additional Home Supplement (AHS) resulted in surges in house sales in March 2015 and March 2016, respectively, evidencing the impact of forestalling.

    These surges were not unexpected and were indicated in the RICS Residential Market Surveys in March 2015 and 2016, and evidenced through Registers of Scotland data. In Wales, however, as witnessed in Scotland, we anticipate that the impact of forestalling will be a short-term issue, assuming LTT rates and thresholds remain the same going forward.”

    In assessing the bands and thresholds of the incoming regime, it is clear that the Welsh Government’s objective is support first time buyers and those operating in the lower end of the market. Whilst this objective is commendable, the progressively higher tax liability of middle to upper priced houses may reduce purchases in that market area which could, ultimately, negatively impact activity across the housing market in Wales.

    Hew Edgar

    Hew Edgar, RICS Policy Manger (Scotland) 7 March at 15:30PM

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