Flat headline readings mask mixed regional picture
• Price series negative in London and to lesser extent the South East, but generally resilient elsewhere
• New sales instructions stabilise but shortage of stock remains acute
• 61% of respondents expect more landlords to exit (rather than enter) the market in the next 12 months
The August 2017 RICS UK Residential Market Survey results show an increasingly divergent picture in key activity metrics across different parts of the country. Sentiment remains cautious in London and, to a lesser extent, the South East, while, further away from the capital, respondents appear to be generally more upbeat with regards to the near-term outlook.
The headline price balance edged up to +6% over the month, compared to +1% previously. Although signalling a return to growth (after the flat outturn in July), this measure is consistent with only a marginal rise in national prices. Behind the headline figure, there was again significant variances across the UK. The London price gauge remains stuck firmly in negative territory, posting the weakest reading since 2008. Furthermore, the price indicator has turned a little softer in the South East of England, with more respondents in this region reporting a fall (rather than an increase) in prices for a third successive month. Both markets share a common characteristic in displaying the highest proportion of contributors sensing the market is overpriced relative to all other parts of the UK.
Alongside this, East Anglia and the North of England were the only other regions to return marginally negative price balances. Elsewhere, the latest figures point to solid price growth in many parts, with Northern Ireland, the North West, Scotland, and the South West seeing the firmest increases (in net balance terms). Going forward, headline price expectations remain subdued over the near term, as the UK average reading was again weighed down by London and the South East. At the other end of the spectrum, respondents in Northern Ireland and Scotland were most confident in seeing further price growth over the coming three months. At the twelve month horizon, London remains the only area in which prices expectations are negative, with all other regions/countries displaying positive net balances.
In terms of demand, the national series suggests there was little change in buyer enquires during August, extending a streak of flat or modestly negative readings into a ninth straight month. Alongside this, agreed sales were again broadly flat, posting a net balance of -4%. As such, nationally, sales have not seen any growth on this measure since November 2016. When disaggregated, weakness in sales was largely concentrated in London, the South East, East Anglia and the North. Meanwhile, healthy sales growth was reported in Northern Ireland, the South West and Scotland over the month. Looking ahead, both near term and twelve month sales expectations are modestly positive for the UK as a whole.
Looking at supply, the new sales instructions net balance came in at -1%, compared with -11% in July. Having turned progressively less negative in each of the last three months, this perhaps hints at a stabilisation in the flow of fresh listings coming to market. In fact, this was the least negative reading since February 2016. Even so, it should be highlighted that, following such a sustained period of deteriorating sales instructions, average stock levels on agents’ books are near an all-time low at 43.2.
Conversely, new instructions have now reportedly increased in London during four of the last six months, with a relatively smart pick-up cited in both July and August. In keeping with this, the average number of properties on agents’ books in the capital has risen from 29 to 36 since February this year (the London measure better captures the inner boroughs). By way of contrast, virtually all other regions have seen stock levels decline over the same period.