Enquiries from new buyers, new instructions from those wanting to sell, and agreed sales in the housing market, have once more declined in May, according to the latest RICS UK Residential Market Survey. In addition, price growth also lost momentum and is predicted to slow further over the next three months.
Although a fall in property coming on to the market is a recurring theme over the past two years, anecdotal evidence from respondents to the survey in May suggests this month’s drop may have been exacerbated by the General Election, as some adopt a "wait and see" approach. In May, 25% more respondents cited a decline in fresh listings (compared to those reporting a rise), producing the most negative reading since July 2016. Alongside this, new buyer enquiries fell at the national level, having remained stagnant over much of the past six months. As with new sellers, a large portion of contributors suspect the General Election is having an adverse impact on demand.
At the same time, agreed sales continued to decline for a second month running as the national indicator saw 8% more respondents seeing a fall in agreed sales (compared to -9% previously).
Going forward, near-term sales expectations imply little change over the coming three months, but beyond this over the next twelve months, respondents appear slightly more optimistic with a net balance of 26% anticipating an increase in activity.
Although lack of supply continues to support prices, the headline price growth indicator moved from +22% to +17% in May, the softest reading since August 2016, and prices continue to slip in central London. Looking ahead, near-term price expectations have also slipped to -1% from +5% in April (the third straight report in which this indicator has softened). London continues to exhibit sentiment more negative in comparison to all other parts of the UK, although near-term expectations in all regions have slipped.
This trend is not expected to continue into the long term with national twelve month expectations remaining solid, at +54%. Further out, over the next five years, respondents envisage house price inflation averaging 3.5% per annum across the UK as a whole.
In the lettings market, tenant demand rose only marginally (on a non-seasonally-adjusted basis), while new landlord instructions were again broadly flat. 17% more respondents nationally expect rents to rise (rather than fall) over the coming three months and, in terms of twelve month expectations, contributors are pencilling in around 2% headline rental growth over the year ahead.
Simon Rubinsohn, RICS Chief Economist said “The latest survey suggests that uncertainty related to the General Election may have contributed to what appears to have been a disappointing level of transactions in the housing market over the spring. Perhaps the most ominous signal emanating from the data released today is that contributors still expect house prices to increase at a faster pace than wages over the medium term despite the difficulty many first-time buyers are clearly having in taking their first steps onto the property ladder.
“The increasingly tight second-hand market remains a cause for concern with the RICS series tracking new instructions to agents recording its fifteenth successive negative reading. It is hard to see this as anything other a major obstacle to the efficient functioning of the housing market.”