House price inflation dropped further in June, according to the latest RICS UK Residential Market Survey. At the same time there's little encouragement for sales activity with agreed sales declining alongside new buyer enquiries and new instructions.
This trend is also being reflected in medium term sales expectations where the twelve month indicator, while still positive, has slipped to its lowest level since the immediate aftermath of the referendum [net balance of +12%].
The RICS Residential Market Survey for June included additional questions to gather further insight regarding the generally flat trend in activity being seen. At a national level, 44% of contributors identified domestic political uncertainty as the biggest factor explaining the current state of the market.
This compares to 27% who highlighted Brexit as the most important factor influencing the picture. Significantly, most parts of the UK apart from the capital showed a fairly similar pattern to the headline numbers. However, in London Brexit and the changes in Stamp Duty were all equally citied as contributing to the lethargy.
Looking at price inflation, in June, 7% of surveyors across the UK saw a rise rather than fall in prices at the headline level. This has slipped from a net balance of +17% in May, and is the lowest reading since July 2016. However, this trend is not wholly reflected across the country.
In Central London the pace of decline in house price inflation continues, with 45% more respondents seeing a decline in prices over the month, while the South East and East Anglia are showing a flatter trend.
By way of contrast, in Northern Ireland 41% more surveyors saw a rise in prices rather than a fall in June and in Wales 38% more respondents saw a rise rather than fall in prices over the month.
The West Midlands and the North West are also regions where prices continue to rise and reported net balances of +33% and +28% respectively.
Moving to overall activity and transaction levels, respondents once again saw a decline in newly agreed sales in June, with 5% more respondents seeing a fall in sales over the month. This decline is the fourth consecutive negative reading and reflects both the lack of stock coming on to the market and a more cautious stance from buyers over recent months.
Newly agreed sales are predicted to remain broadly stable over the next three months but the twelve month sales expectations indicator reading, while still pointing to an increase in activity, has slipped to its lowest level since the immediate aftermath of the referendum [net balance of +12%].
Significantly for future activity, new instructions fell again and for the sixteenth month in a row, with 19% more respondents seeing a fall rather than rise in property coming on to the market. Against this backdrop, average stock levels have slipped to a new low.
RICS Chief Economist, Simon Rubinsohn said “The latest results demonstrate the danger, however tempting, of talking about a single housing market across the country. RICS indicators particularly regarding the price trend are pointing towards an increasingly divergent picture. High end prime properties may be seeing prices slipping back but, for good or ill, prices are continuing to move higher in many other segments of the market. Indeed, the disaggregated data suggests that this will continue to be the case over the coming months.
“Perhaps not surprisingly in the current environment, the term ‘uncertainty’ is featuring more heavily in the feedback we are receiving from professionals working in the sector. This seems to be exerting itself on transaction levels which are flatlining and may continue to do so for a while particularly given ongoing challenge presented by the low level of stock on the market.”