RICS survey hints that property prices could pick up post-election

The last RICS survey said better times were ahead – and then an election was called. All eyes were on their latest survey which was released today, and showed some surprising results.

As expected, the October 2019 RICS UK Residential Market Survey continues to show a subdued sales market, with negative readings covering new buyer enquiries, agreed sales and new instructions.

However, near term expectations for sales over the next three months have improved a little, and a stable trend is now anticipated – potentially indicating a change post-election.

Director of Benham and Reeves, Marc von Grundherr, commented: “The UK property market remains stuck in a politically inspired Groundhog Day and we continue to see the same market trends that have persisted for quite some time, and will no doubt continue to persist until the end of the year at the very least.

While market performance has been poor at a top-level, it remains steady enough and we’re yet to see any notable or immediate decline. Price growth has plateaued although there remains a consistent level of transactions. As always there is a regional swing and some areas remain buoyant while others freeze over.

“Of course, buyers and sellers will now sit tight until the dust has settled on next month’s election and this will ensure that the story that we’ve heard time and time again will be told some more until we ring in the New Year. At which point we cross our fingers and hope to turn a new page so that we have something else to talk about.”

For the time being, the conversation du jour will continue to be Britain’s unstable political climate. Across the UK as a whole, enquiries from new buyers fell for the second month in succession, with a net balance of -16% of respondents citing a decline. Alongside this, newly agreed sales continued to slip. Looking at the different areas of the UK, sales dipped across virtually all parts apart from Northern Ireland, where contributors noted a marginal increase.

Looking ahead, as the three-month sales outlook turned less pessimistic, twelve-month expectations also improved, posting the highest reading in nine months (net balance +23%).

As the UK continues to struggle with housing supply, respondents noted that new instructions fell for the fourth consecutive month (at the national level). This decline was reflected across the whole of the UK. In addition, at -49%, the net balance of survey participants reporting an annual decline in the level of market appraisals undertaken was the most negative since this series began in 2017.

Adrian Moloney, Sales Director of OneSavings Bank, said: “With last month’s RICS figures showing the weakest performance since June 2016, the continuation of low sales this month is a clear indicator of consumer confidence. It is still too early to call a downturn in sales a trend at this stage. The impact of political uncertainty continues to drag on, as many opt to hold off buying for now. However, for the serious buyer, the bargains are there to be had, particularly with mortgage rates as low as they currently are.

“The great hope is that the election will provide some much-needed direction and stability for the economy. However, while campaigning will be focussed on Brexit, this is only one of many issues facing the housing sector that needs to be addressed. The bigger issue, that will affect the housing market long after Brexit is out of the way, is the levels of investment in affordable housing. Commitment to improving the current levels of housing stock must be a priority for the next Government, and is the only true way of improving home ownership levels.”

Moving to prices, the national indicator on house price inflation posted a broadly flat net balance of -5%, little changed from -3% previously. Current conditions could place marginally downward pressure on headline house prices at the national level in the near term.

Over the next 12 months however, prices are expected to increase. Northern Ireland, Wales, Scotland and the North West of England display the strongest expectations for house price growth over the coming year.

Simon Rubinsohn, RICS Chief Economist, said: “The latest survey feedback continues to suggest that both buyer and seller activity remains in a holding pattern, hampered by political and economic uncertainty. Given the upcoming general election next month, it appears unlikely that these trends will pick-up to any meaningful extent over the remainder of this year.

“The picture remains very different on the lettings side however, with tenant demand gathering momentum over recent months. This is running against an increasingly tight supply backdrop for rental properties and seems set to squeeze the pace of rental growth higher going forward.”