Housing market stronger than first predicted as activity remains high during October
The latest market report from RICS has revealed that, during October, the UK housing market performed better than widely expected resulting in another strong month of activity with near term expectations looking favourable.
However, according to the data, this may not last as the longer-term outlook for sales remains subdued, with the difficult economic backdrop expected to weigh on activity once government support measures are withdrawn further down the line.
Looking at new buyer enquiries, a net balance of +46% of respondents cited an increase in demand at the headline level during October. This marks the fifth consecutive positive monthly reading, following the lockdown induced slump seen earlier in the year.
Although the most recent figure is a little more modest compared to those posted over the previous four months, it remains consistent with solid momentum behind buyer demand nonetheless.
Meanwhile, the survey’s indicator tracking new instructions coming onto the sales market remained in positive territory for a fifth successive report, posting a net balance of +32% compared with +38% previously. As such, this represents the longest uninterrupted sequence of growth in fresh listings going back to 2013. Consequently, stock levels on estate agents books edged up slightly to average 43 homes per branch (from 42 last month).
Despite the latest pick-up, it should be highlighted that the current level of inventories being reported remains relatively low when placed in a historical context.
With regards to transaction volumes, a national net balance of +41% of contributors saw a rise in agreed sales over the month. Again, the latest return has eased slightly compared to +54% in September but remains well above the average reading posted over the past year (+9%).
At the regional level, East Anglia stands out as displaying particularly robust sales momentum at present (net balance +72%), while the North West and West Midlands also exhibit elevated net balance readings of +62% and +60% respectively.
Looking ahead, sales expectations for the coming three months remain modestly positive, returning a net balance of +17% (compared with +16% last time). That said, sentiment towards the twelve-month sales outlook is more downbeat, with a net balance of -27% of respondents anticipating sales will begin to weaken over the longer time-frame.
Notwithstanding this, the current upswing in demand and sales continues to drive house prices higher. At the headline level, a net balance of +68% of survey contributors saw prices increase in October (up slightly from +62% previously). What’s more, house prices are rising across all parts of the UK, with Wales, the West Midlands, the South West and Yorkshire & the Humber all-seeing exceptionally strong growth (in net balance terms).
Even so, respondents appear doubtful that this rate of house price inflation can be sustained for much longer. Indeed, near term price expectations were trimmed slightly at the national level over the month, with the net balance coming in at +13% compared to +22% in September. Further out, at the twelve-month time horizon, respondents expect a much flatter trend in house prices to emerge, evidenced by the latest net balance for the series easing to +8% at the national level.
In the lettings market, tenant demand continued to pick-up in the three months to October (seasonally adjusted quarterly series), marking the second straight quarterly rise. At the same time, the volume of landlord instructions coming onto the market declined according to a net balance of -8% of survey participants.
While expectations for rental growth over the near term remain positive across most parts of the country, London is a clear exception. Across the capital, a net balance of -55% of respondents foresee rents declining over the coming three months (compared to a positive national net balance of +13%).
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "The RICS figures are interesting but don’t give the full picture as the market quietened down a little towards the end of October/early November. However, it has picked up again quite noticeably in the past few days as the prospect of a vaccine has improved. This has brought more buyers to the market than has been the case for several weeks and is stiffening the resolve of some sellers not to accept low-ball offers.
"On the ground, we are seeing more buyer and seller determination to get deals done in order for both to take advantage of the stamp duty holiday."
Source: Property Reporter