Activity indicators still point to little impetus

 New instructions edge into positive territory for the first time since 2016

  • Buyer demand continues to decline but to a lesser extent that at the beginning of the year
  • Results continue to suggest significant regional variation across the country

The May 2018 RICS Residential Market Survey results are tentatively showing some signs of stability coming through on the supply side, with the new instructions indicator moving out of negative territory for the first time in 27 months. That said, this was insufficient to shift overall market sentiment materially with activity remaining more or less flat. Moreover, forward looking metrics for prices and sales suggest the market is unlikely to gain impetus, at least in the near term.

The headline RICS price balance came in at -3% in May pointing to no change in house prices over the month, following a marginal decline in April. However, as has been the case for some time, there are material regional dimensions to this trend. The capital continues to return the most negative sentiment with the London series signalling a fall in prices once again. At the same time, downward pressure on prices was reported across the wider South East (albeit to a slightly lesser extent than in the capital). Notably, after nearly three years of solid price growth, momentum appears to have slipped across the South West with the price balance in negative territory for the second month in a row. By way of contrast, house prices continue to rise firmly in the Midlands, the North West, Wales, Northern Ireland and Scotland.

Near term price expectations point to a marginal decline on a UK-wide basis. That said, this is mainly driven by a negative outlook for prices across the south of England. Further out, prices are expected to rise to a greater or lesser extent across all areas of the country. London stands as the only region where prices are expected to decline on a twelve month basis.

In the latest results, there are indications of a more stable trend in supply with the new instructions indicator edging into positive territory for the first time in more than two years. Furthermore, in London, the new instructions series has now been positive for three consecutive months. Even so, the net balance reading of +5% for the UK as a whole is still consistent with a relatively flat trend in new instructions. Furthermore average stock levels on estate agents books were broadly steady at 42.5, close to an all time low. It therefore remains to be seen whether this marks the beginning of supply pressures finally easing across the market. When contributors were asked to compare appraisals that were undertaken in May with the same period of last year, 18% more stated they are lower on this like for like basis. This does not appear to bode particularly well for the new instructions pipeline going forward.

Turning to demand, buyer enquiries fell once again although the decline was modest in comparison to the trend noted at the beginning of the year.  Six out of the twelve regions/countries covered in the survey saw an increase in new buyer enquiries over the month, again highlighting the mix bag of result across the UK.

Meanwhile, agreed sales held broadly steady for the second successive report and, significantly, the net balance of -2% represents the least negative reading for fourteen months. However the regional breakdown suggests that sales are rising firmly in just four regions whilst sales trends are either flat or negative across the rest of the UK. Looking ahead, respondents expect little change in transactions over the coming months, at least at the national level, although the twelve-month outlook is marginally more positive. Contributors in Scotland and Northern Ireland returned the strongest sales outlook over both the three and twelve-month horizon. Elsewhere, although still positive, sales growth is expected to be only modest.