Price growth in the UK is losing momentum and is expected to continue to slow over the next three months with enquiries from new buyers and instructions from sellers also declining.
Expectations in the housing market remain subdued, according to the latest monthly report from the Royal Institution of Chartered Surveyors (RICS) and it suggests that the slowdown has been exacerbated by the election.
Although a fall in property coming on to the market has been a recurring theme over the past two years, anecdotal evidence from respondents to the survey in May suggests more may have adopted a wait and see attitude.
Some 25% more respondents cited a decline in fresh listings compared to those reporting a rise, producing the most negative reading since July 2016. Alongside this, new buyer enquiries fell at the national level, having remained stagnant over much of the past six months.
At the same time, agreed sales continued to decline for a second month running as the national indicator saw 8% more respondents seeing a fall in agreed sales compared to 9% previously.
Going forward, near term sales expectations imply little change over the coming three months, but beyond this over the next 12 months, respondents appear slightly more optimistic with a net balance of 26% anticipating an increase in activity.
Although lack of supply continues to support prices, the headline price growth indicator moved from 22% to 17% in May, the softest reading since August 2016, and prices continue to slip in central London.
Looking ahead, near term price expectations have also slipped to -1% from +5% in April, the third straight report in which this indicator has softened. London continues to exhibit sentiment more negative in comparison to all other parts of the UK, although near-term expectations in all regions have slipped.
But this trend is not expected to continue into the long term with national 12 month expectations remaining solid at 54%. Further out, over the next five years, respondents envisage house price inflation averaging 3.5% per annum across the UK as a whole.
In the lettings market, tenant demand rose only marginally while new landlord instructions were again broadly flat. Some 17% more respondents nationally expect rents to rise, rather than fall, over the coming three months and, in terms of 12 month expectations, contributors are pencilling in around 2% headline rental growth over the year ahead.
‘The latest survey suggests that uncertainty related to the general election may have contributed to what appears to have been a disappointing level of transactions in the housing market over the spring,’ said Simon Rubinsohn, RICS chief economist.
‘Perhaps the most ominous signal emanating from the data released today is that contributors still expect house prices to increase at a faster pace than wages over the medium term despite the difficulty many first time buyers are clearly having in taking their first steps onto the property ladder,’ he pointed out.
‘The increasingly tight second hand market remains a cause for concern with the RICS series tracking new instructions to agents recording its fifteenth successive negative reading. It is hard to see this as anything other a major obstacle to the efficient functioning of the housing market,’ he added.
According to Richard Sexton, director at e.surv chartered surveyors, a lack of affordable housing for first time buyers is one of the main catalysts for the slowdown. ‘The UK’s housing stock has been stagnant for too long and if more affordable homes aren’t built, things will only get worse. We urge the Government to start working closely with the industry to give more people the opportunity to become home owners,’ he said.