June 2015: Residential Market Survey
Demand sees further moderate rise while price momentum accelerates
• Buyer enquiries increase moderately and across the majority of areas
• Price momentum continues to rise and expectations strengthen
• New instructions remain in short supply, with respondents seeing a slight fall over the month
The June RICS Residential Market Survey shows a further acceleration in price growth. Prices are reported to be rising in the majority of areas, with Northern Ireland and East Anglia seeing particularly firm momentum during the month. Driving this pick up in growth was a further modest rise in demand across most parts of the UK alongside yet another decrease in the level of new instructions.
Buyer demand rose in each area except the South East. Demand in Scotland and Northern Ireland remains on a firmly upward trend while London and the West Midlands also saw a pick up in enquiries over the month. With mortgage rates still near record lows and the labour market continuing to strengthen, this moderate increase in demand is no real surprise. Although the most recent mortgage approvals data (from the Bank of England) for May showed a 4.7% fall versus the April figure, this probably just reflects some recoil from the sharp rise the previous month, and the underlying trend does appear to be gently upwards. Reflecting this, respondents expect activity levels to pick up across all areas over the coming three months. At the twelve month horizon this positive outlook for sales growth is also shared across all areas..
Supply of new stock to the market decreased once again in June with the headline RICS New Instructions balance remaining in negative territory for the fifth consecutive month. Discussions with some respondents suggest that the underlying causes of this continued supply shortage vary across different parts of the UK. Transaction costs are one significant factor in some of the more expensive markets. Costs such as stamp duty are making renovation/extension works more financially appealing than changing home. There is some consensus that the lack of stock is, to an extent, self perpetuating as it acts as a deterrent to new vendors entering the market due to the reduced choice on offer for their next purchase. With respondents, on average, reporting no change in the number of appraisals carried out in June, there is no signal, as yet, that the supply shortage is going to improve. Indeed, stocks per surveyor reached a new low of 49.5 per branch in June.
Despite the lack of new supply, the RICS Agreed Sales balance showed a further marginal increase in transactions in June. This hides substantial variation across areas with the most consistent feature of the data over the last year being the sustained contraction in activity in London and the South East and the persistent increase in Northern Ireland.
The outlook for prices strengthened once again in June with respondents in all areas now expecting an increase at both the three and twelve month horizons. A net balance of 41% of respondents envisage prices rising in the coming three months while the twelve month expectations series reached a 15 month high. Contributors, on average, foresee prices rising by a little over 3% in the year to come with price growth accelerating thereafter to an average of 4.8% per annum over the coming 5 years.
The strongest level of sales for quite some time with the “top” end doing well. However on the flip side market appraisals and new instructions were down in numbers. Whether the seasonal slow down will occur this year remains to be seen.
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