Property market “subdued with few signs of recovery”, RICS says

The property market “remains subdued” with “little sign of a meaningful recovery”, according to the latest RICS survey.

Both buyer demand and agreed sales were unchanged last month from the figures for June.

Firmly negative

New buyer enquiries recorded a net balance of -28% in July, the same as the previous month, respondents reported.

Although still firmly negative, this has improved from the recent low of -41% recorded in March.

Simon Rubinsohn, Chief Economist at RICS (pictured), said: “The housing market remains subdued, and while that is not usual over the summer months, it is clear from the RICS seasonally adjusted data, that the combination of geopolitics, the domestic political climate and the cost of mortgage finance are continuing to weigh on sentiment.

“Significantly, the forward-looking metrics also remain downbeat, which is not the sort of climate likely to encourage housebuilders to step on the gas on existing sites or in land-buying, as highlighted in recent trading statements from developers.

“Meanwhile, feedback from respondents to the RICS survey is continuing to draw attention to the impact of latest round of regulation on the rental market with the key indicator of new instructions pointing to a further drop in supply.”

Stabilised

Meanwhile, agreed sales registered a net balance of -30%, also unchanged from the previous month and less negative than the -37% recorded in April.

The flow of properties coming onto the market stabilised in July. New vendor instructions recorded a net balance of -4%, compared with -23% in June.

Market appraisals, measuring activity against the same period last year, returned a balance of +19%.

The national house price balance came in at -30%, marginally improving from -32% in June and the recent low of -35% in April.

Flattening

Regional differences remain significant, RICS says. London, the South East and South West continue to report more negative price balances than the national average, whilst respondents in Northern Ireland continue to report rising prices.

After a sustained period of stronger growth, price momentum in Scotland also appears to be flattening.

Expectations for prices in the coming three months remain weak, with a net balance of -31%. However, respondents are slightly more positive across a 12-month horizon, with the balance standing at +4%.

London stands out as an area lacking confidence, with year-ahead price expectations deteriorating to -23% in July, from -10% previously.

Industry reaction

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “Although thankfully not as quiet as a few months ago, the market is not seeing signs of a ‘Burnham Bounce’ – yet.

“It may be down to the time of year, but fewer listings mean the relatively low number of proceedable buyers have less choice, which is slowly increasing the pace of decision making.

“However, the market remains price sensitive so generating buyer traction remains challenging, particularly while uncertainty about possible mortgage rate increases continues.”

Gareth Lewis, Deputy CEO at MT Finance, says: “The market is still stagnant with little movement and low transaction volumes. With a lack of competitive tension in many transactions, property prices aren’t shifting much either way.

“If you get the right property in the right location then this is not the case, but few meet this criteria.

“The market still badly needs some stimulus and requires more people to transact. Interest rates were expected to fall this year but that outlook has changed with the Bank of England holding base rate for several months. It is not an easy market.”

Tom Bill, Head of UK Residential Research at Knight Frank, says: “The backdrop is less volatile than last summer, but upwards pressure on mortgage rates and tax uncertainty are the familiar causes of hesitation among buyers, which means demand is improving but from a low base.

“While the Prime Minister has ruled out a land value tax, the aversion to spending cuts on the backbenches means the government will need to raise a selection of smaller taxes by default and that creates uncertainty. Meanwhile, borrowing costs don’t appear to be heading for a meaningful drop as the unpredictable Middle East conflict drags on.”