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Uncertainty causing housing transactions to ‘flatline’ – RICS

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  • 13/07/2017
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Uncertainty causing housing transactions to ‘flatline’ – RICS
House price inflation dropped further in June, as sales activity remained flat, according to the latest RICS Residential Market Survey.

In June, 7% of surveyors saw a headline price increase, compared with 17% in May, the softest reading since last July.

With the net balances for new buyer enquiries, new instructions and agreed sales stuck in negative territory, respondents have lowered their sales expectations for the next 12 months. The outlook for sales growth has dropped from +26% to +12%.

However, this loss of momentum is not consistent across the country. London prime data continues to return the most negative results, with no let up in the pace of pricing decline. Likewise, the South East and East Anglia are subdued, whilst the North continues to show little change from recent readings.

Exceptions are Northern Ireland, posting a net balance of +41%, Wales a reading of +38% and the West Midlands and the North West at +33% and +28% respectively.

Respondents once again recorded a decline in newly-agreed sales. The net balance of -5% is consistent with a fall in transactions. This is the fourth consecutive negative reading and reflects both a lack of stock coming on to the market and a more cautious stance from buyers over recent months.

The RICS new instructions net balance also fell again (-19%), making it the sixteenth month in a row that more contributors have indicated property coming into the market has dropped, rather than risen.

Against this backdrop, average stock levels have slipped to a new low.

RICS chief economist Simon Rubinsohn said: “The term ‘uncertainty’ is featuring more heavily in the feedback we are receiving from professionals working in the sector. This seems to be exerting itself on transaction levels which are flatlining and may continue to do so for a while, particularly given ongoing challenges presented by the low level of stock on the market.”

He cautioned against treating the UK as a single housing market.

“RICS indicators, particularly regarding the price trend, are pointing towards an increasingly divergent picture. High end prime properties may be seeing prices slipping back but, for good or ill, prices are continuing to move higher in many other segments of the market,” he said.

“The disaggregated data suggests that this will continue to be the case over the coming months.”

At a national level, 44% of contributors identified domestic political uncertainty as the biggest factor explaining the current state of the market. This compares to 27% who highlighted Brexit as the most important factor influencing the picture.

In London, the political climate, Brexit and the changes in Stamp Duty were all equally cited as contributing to the lethargy.

In the next three months transactions are expected to remain broadly stable with a net balance of +8% expecting an increase in sales nationally; little changed from the +6% reading recorded in May.

In the lettings market results, tenant demand edged up slightly over the month but new landlord instructions continue to decline. The underlying picture appears consistent with rents at a headline level continuing to increase at roughly the same pace as in recent quarters.

Jeremy Duncombe, director of the Legal & General Mortgage Club, said the pessimistic results are not surprising given recent trends.

“Yet when compared to the wider economic and political landscape, the housing market has continued to amaze many. It has remained consistently robust, despite everything we have seen over the last 12 to 18 months,” he said.

“In light of this, there is nothing to suggest that the market is in dire straits. The Northern hotspots of Manchester, Leeds and Birmingham are continuing to see strong price growth and first-time buyers levels are up by 10% year-on-year – nearly doubling from the market low in 2009. A flattening in London is also not necessarily a bad thing, as the North/South divide begins to even out.”

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