• Buyer demand growth picked up as the unseasonably mild weather boosted activity
• Price momentum remains firm and near term price expectations reach 20 month high
• New instructions increased very slightly for the first time since January 2015

The RICS Residential Market Survey for December 2015 shows continued strong price growth to end the year with a net balance of 50% of respondents reporting prices to have risen. East Anglia and the South East are still seeing the firmest price momentum but all parts of the UK are reported to be experiencing some growth. This is being driven by a distinct demand supply imbalance with buyer enquiries rising at a faster pace than new instructions for the eleventh consecutive month.
Anecdotal evidence suggests that demand was more robust than expected in the run up to Christmas and a net balance of 16% of respondents reported an increase in buyer enquiries compared to November. There are suggestions that this increase in demand was driven, at least in part, by buy-to-let investors eager to make their purchase before the new tier of stamp duty is to be introduced on these purchases in April. Demand rose across all parts with the exception of East Anglia where 26% more contributors reported a decrease rather than a rise in enquiries.
New instructions to sell edged up slightly for the first time since January 2015 with a net balance of 4% of respondents noticing a rise. While a reading as low as 4% is indicative of a broadly flat supply picture, it is interesting to note that more parts of the UK saw a rise in new instructions, however modest, rather than a fall for the first time in over two years.
Despite the slight increase in new instructions, the average stock of properties on surveyor’s books at the end of December   was almost unchanged compared to the previous month as agreed sales also rose. Survey feedback suggests that buyers and vendors were rushing to seal transactions before the holiday period and that the unseasonably mild weather helped to fuel activity. Sales rose across most parts of the UK and contributors in all areas expect sales activity to increase over the coming three months. At the twelve month horizon, a net balance of 49% of respondents foresee transaction levels rising, the highest reading since May, with contributors in all parts of the UK expecting this outcome.
If there is a rush to complete purchases of second homes and buy-to-let properties as we approach April, it is likely to add to price pressures in the near term. Indeed, the three month price expectations net balance increased to 43% in December, from 35% the previous month, to reach its highest value since April 2014. However, this is just one factor adding to demand and at the twelve month horizon, expectations for price growth also ticked up with a net balance of 72% of contributors envisaging prices rising over the year to come.
The lending environment is likely to remain supportive of activity in the near term with the Q4 Bank of England Credit Conditions Survey suggesting that lenders intend to increase credit availability in the coming months, following a slight rise toward the end of 2015.
London and the South East are the areas where the highest proportion of respondents view current market prices as expensive, with 57% and 62% of contributors respectively of the perspective that prices are stretched relative to fundamentals. However, these are also two of the regions where contributors have the highest expectations for price growth over the medium term. Respondents expect prices in London and the South East to rise by 4.8% and 5.2% per annum respectively over the course of the next 5 years (three month average).

As expected the New Year has started off strongly with a good level of new instructions and a good level of offers being submitted, particularly on 2nd homes with the increased Stamp Duty levels coming in on 1st April.

May I take this opportunity of wishing you all a healthy and prosperous New Year.

Oliver Miles FRICS
RICS Registered Valuer