The RICS UK Residential Market Survey for January highlights that 2019 is off to a slow start, showing a subdued backdrop as enquiries, sales and new instructions all fall further.
In the near term, there is little prospect of a turnaround, as concerns over the potential impact of Brexit, alongside affordability constraints continue to cause buyers and sellers to hesitate. However, expectations at the 12-month horizon are modestly positive. Survey key findings:
1. Activity measures for both buyers and sellers continue to slip.
2. Price balance weakens at the national level, led by London and the South East.
3. As sales drop, the lettings market is faring better with demand rising.
During January, new buyer enquiries fell again at the headline level marking the sixth successive monthly decline. What’s more, demand declined to some degree across virtually all parts of the UK. Scotland was a slight exception, but even there the trend was only flat.
Alongside weakening demand, the number of new properties being listed on the sales market also deteriorated, with the net balance reading of -25% the weakest since July 2016. Rounding off a subdued month for market activity, agreed sales also fell further, with the pace of decline seemingly gathering momentum compared to December.
Simon Rubinsohn, RICS chief economist: "Resolution of the Brexit negotiations is widely seen as critical to encouraging potential buyers back into the market, although whether that will be sufficient in London and parts of the South East where affordability remains stretched and the tax changes are most penal, remains to be seen."
A brighter outlook?
Sales expectations for the coming three months remain downbeat, both at the national level and across most parts of the UK with expectations negative in 11 of the 12 regions/countries covered. The outlook over the next 12 months is stronger, however, as a headline net balance of +16% of contributors are expecting sales to rise.
Prices also continued to slip, as the headline price indicator declined for the fourth month in succession, with the net balance easing to -22%. When broken down, London and the South East continue to display the weakest readings, followed by East Anglia and the South West. In these regions the strong price growth over the past six years has left affordability looking stretched, with the high prices a key factor hampering demand. Elsewhere, prices continue to rise in Northern Ireland and Scotland.
Mixed news in the lettings market
Across the lettings market, tenant demand rose modestly in the three months to January (seasonally adjusted series). It has now picked up in each of the last three quarters. Nevertheless, nationally new landlord instructions continue to dwindle, remaining in negative territory for an eleventh successive quarter. Respondents expect rents to rise by roughly 2% over the next 12 months, and at the five-year horizon, averaging 3% each year.
