The State of the Housing Market – Prices and Demand
Various pieces of evidence have been released recently that shed light on the property market as it currently stands. Taken altogether the outlook is far from gloomy – most observers have interpreted the slowdown in price rises over the past few months as being a welcome stabilising within the market, rather than a sharp correction in prices that could have more serious implications.
The Royal Institute of Chartered Surveyors (RICS) put out their UK Residential Market Survey in October. This documented the slowdown in price rises with new buyer demand down for the third month in a row and momentum within the market back to the position of 16 months previously. In London demand was down for the fifth month in succession, reaching levels unseen since April 2012. Further to the October report is the release of RICS data in early November that showed the trend had continued during October, with demand down once again and sales down across the UK except in the South-West and in Yorkshire.
In particular, the Residential Market Survey showed up a drop in 12 month price expectations amongst members of the RICS for larger properties, that is, those with three bedrooms and above. Since that start of 2014 the expectation of price rises on three bedroom properties was down to 2.2 per cent from 3.8 per cent, and for four bedroom properties the figure was down from 3.5 per cent to 2.0.
The effect of the Scottish Referendum is less clear. The RICS Market Survey shows there was a 6 per cent increase in the number of surveyors reporting a drop in the amount of interested buyers. However evidence from the Registers of Scotland released at the end of October show that despite the drop-off in buyer interest found by the RICS, the level of sales between July and September were well up for the quarter. The volume of sales in the period was up 9.1 per cent, reaching a high not seen for any quarter since 2008, with house prices up 5.2 per cent compared to the same time in 2013 – there is also a small boom expected following the victory of the No campaign.
More concerning was the minimal change in the supply of new housing shown up by the RICS report. During September surveyors reported a net balance of just 1 per cent in the amount of new properties coming onto the market. Unsurprisingly, then, rental demand remains solid across the entire UK and is likely to do so until increased amounts of affordable housing are built.
Both the RICS and the Council of Mortgage Lenders expect house prices to continue to rise over the next three months, except in London: the RICS forecasts rises of 2.1 per cent. Neither institution sees this figure or the slowdown as alarming, representing rather a necessary slowing and calming of the market that will be beneficial moving forward.