SALES INSTRUCTIONS RISE WHILE ACTIVITY STRENGTHENS FURTHER
• New instructions increase for the third consecutive month
• New buyer enquiries and sales continue to grow
• Price momentum remains strong while expectations soften but remain generally upbeat
The February 2016 RICS Residential Market Survey results show a continued pick up, albeit gradual, in the number of properties coming onto the market, alongside a further increase in sales activity. Nonetheless, with market conditions still tight, house price growth retains a considerable amount of momentum for the time being.
The headline price balance has now remained in the narrow range of +48% to +50% in each of the past five months. This indicator is therefore still consistent with house price inflation gathering pace over the coming months. That said, the new enquiries less new instructions indicator, which has a longer lead over hard data, suggests price momentum may then begin to fade towards the latter stages of 2016. At the regional level, East Anglia continues to register the sharpest price increases across all parts of the UK. Interestingly, London and the North East were the only two regions in which prices failed to rise, holding broadly stable over the month. That said, a further breakdown of the data shows outer parts of London exhibit a significantly firmer price trend than central areas.
Looking ahead, prices are expected to continue rising across the UK as a whole, even if the strength of projections has just started to moderate at both the three and twelve month horizons. In London, near term price expectations turned negative for the first time in twelve months although, again, much of this decline is concentrated in central parts of the capital. Notwithstanding this, contributors are still pencilling in average annual growth in overall London house prices of close to 4.5% over the next five years. This is broadly in line with the national average.
After gathering pace immediately following the announcement of an additional 3% stamp duty surcharge on buy-to-let properties and second homes (coming into effect 1st April), buyer demand continued to rise. This marks the eleventh consecutive month in which new buyer enquiries have increased. What’s more, demand growth has now outstripped that of supply in thirteen successive reports (in net balance terms). Nevertheless, new instructions to sell have begun to rise modestly with the headline series indicating fresh listings have increased in each of the past three months.
On the back of the improving supply and demand flow, newly agreed sales rose firmly on a UK-wide basis. Moreover, the rate of growth equalled the strongest reported since April 2014. Within this, the South West continues to see the sharpest growth in transaction volumes, in keeping with the findings of the last three surveys. Going forward, sales are anticipated to rise to a greater or lesser degree across the vast majority of the UK over the next twelve months. London is an exception to this, where sales are projected to hold broadly stable. Anecdotal evidence suggests tax changes; concerns over global economic uncertainty are all taking their toll on buyer sentiment in the capital.
Across the UK as a whole, 59% of respondents perceive current market prices to be around fair value currently. This represents a slight fall relative to the 64% who took this view six months ago. London and the South East continue to demonstrate the highest proportion of contributors sensing their local market to be overpriced to some extent. In total, 67% of London respondents now believe valuations are stretched relative to fundamentals, a steady increase from the 54% who were of this opinion six months ago. In the South East, 56% of the survey sample feel residential property is expensive to some extent, only a marginal pick up from 54% back in August 2015.
In February the market continued to be buoyant with applicants purchasing second homes keen to complete before 1st April and solicitors being “snowed under” particularly with flat sales. Looking forward, there may be a period of uncertainty with the referendum and the 3% additional stamp duty on 2nd homes.
Please do not hesitate to contact me should you wish to discuss any matter regarding the marketing of your property. Oliver Miles FRICS RICS Registered Valuer