DEMAND REMAINS SLUGGISH but SURVEYORS EXPECT BOOST from STAMP DUTY REFORM
1. • Buyer enquiries decrease for the sixth consecutive month
2. • Supply conditions remain tight as new instructions slip again
3. • Yet confidence in the sales outlook improves somewhat
The December RICS Residential Market Survey shows that buyer enquiries decreased for the sixth consecutive month with the headline national figure masking a very mixed picture across different parts of the UK. While there does not appear to have been any immediate response in demand resulting from the recent changes to the Stamp Duty structure, respondents expect the reforms to result in an increase of around 2%-5% in both prices and sales volumes over the coming twelve months, according to the December survey.
Meanwhile, new instructions fell across most parts of the UK. The combination of sluggish demand and fewer properties coming on to the market are helping to keep sales levels muted. The RICS agreed sales net balance showed stable activity levels in December, following the falls that had been seen over the previous four months but sales expectations remain positive. While near term sales expectations have moderated, with the London balance drifting back into negative territory, the twelve month outlook has actually strengthened in most parts of the UK.
At the national level contributors expect the recent changes to the Stamp Duty system to have a positive impact on both sales and prices in the year to come. However this opinion is not shared by respondents across all regions. Indeed, in London the results suggest that the changes will have a negative impact and estimates are that the new system could result in sales volumes that are between 5%-10% lower and prices that are between 2%-5% lower than they otherwise would be.
However, this figure for London as whole masks the impact of the policy change across boroughs and across types of property. Given that the price at which the policy change begins to negatively impact the buyer is £937k, it is only larger homes or properties in more prime areas that are likely to incur a negative effect. The December survey is in some way reflective of this as it points to a more positive price outlook for smaller London properties (one and two bedrooms) than larger ones (three and four bedrooms).
Respondents’ reported ‘perceived LTV ratios’ to have been broadly stable across all categories of buyer over the month although in each case lending conditions are more restrictive than in early 2014. Indeed the Bank of England Credit Conditions Survey for Q4 highlights a reduction in the willingness of lenders to supply mortgages at high LTV’s and maximum LTI ratios fell over the quarter. However, mortgage rates have been drifting down in recent weeks, which may provide some support for the market. Meanwhile, contributors to the survey highlight political uncertainty as a potential challenge for the market ahead of the upcoming general election.
Locally as expected, the property market slowed during December but the New Year has seen a significant increase in activity in all sectors. However prices may only increase by 2-3% this year. Possibly there will be strong market activity until Easter, weather permitting, but it will probably slow down thereafter until after the Election.
Please do not hesitate to contact me should you wish to discuss any matter regarding the marketing of your property.
Oliver Miles FRICS FCABE
RICS Registered Valuer