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Further fall in housing stock as demand also falls for the eleventh month

The indicators for future activity in the UK housing market remain subdued, according to the February 2018 RICS UK Residential Market Survey.

Survey in brief

  • New buyer enquiries fall for the eleventh consecutive month
  • Average stocks on estate agents’ books hit fresh record low
  • Results continue to signal significant regional variation across the country

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The new sales trend

Continuing a prevalent trend; new buyer enquiries, new instructions and newly-agreed sales continued to drift lower in February. New buyer enquiries fell for an eleventh successive month with 16% more respondents seeing a fall rather than a rise in enquiries. Meanwhile, the number of agreed sales also remains slightly negative (net balance -17%), similar to figures seen over the last six months.

There continue to be significant regional variation in the results, however, and new buyer enquiries continued to increase (taking a three-month average) in Scotland, Northern Ireland and Yorkshire and Humberside in February. Declining enquiries from new buyers were observed in London and the South East, as well as the East Midlands with the trend in most other regions broadly flat.

Alongside ongoing concerns about affordability in some areas of the country, part of the problem may lie in the lack of choice of properties to purchase with the new instructions indicator falling once again, recording its lowest reading since July 2016. This has pushed the average stocks (per branch) on the books of agents who respond to the survey to a new record low of just under 42.

Available stock levels also look unlikely to improve, with 15% more respondents indicating that the number of valuation appraisals being undertaken in February was lower than a year earlier.

House prices now and looking ahead

Looking at prices, the national price balance was reported as flat in February which is the ninth month in a row that contributors have reported little change in headline prices. The three-month price expectations paint a similar picture. The regional price data does, however, continue to show significant divergence with the price readings particularly strong in Wales, the North West, Northern Ireland and the East Midlands. By way of contrast, feedback on prices remains negative to a greater or lesser degree in London, East Anglia, the South East and the North.

The longer five-year indicator for prices and rents continues to suggest that prices will increase at a slightly slower pace than rents, although, both point to the growth of approximately 15% at the end of the five-year period.

Why is the new build market fairing better?

In an additional question included in the survey, respondents were asked about the key factors driving demand for new build properties. At the national level, the main driver was the lack of stock in the second-hand market. This is followed by the appeal of the Help to Buy scheme with developer incentives and the ‘quality’ of new homes scoring lower.

The one region where the results differ slightly is London; the shortage of existing stock is viewed as a major influence but Help to Buy is viewed as even more important for driving demand for new build properties.

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