The ongoing new listings drought could lead to transaction levels flatlining next year, warns the RICS.
Its UK Residential Market Survey recorded another month of declining new listings, which is set to frustrate the growing number of prospective buyers.
Agents reported a net balance of +13% in new buyer enquiries in November, a slight increase on the +11% reported the previous month, but a net balance fall of -9% in agreed sales – the fifth negative result in a row. The number of home appraisals in November was also down on the same month last year, with the latest net balance coming in at -20%.
RICS says a lack of stock is driving competition between prospective buyers, resulting in house prices being pushed higher. A net balance of +71% of respondents has seen prices increase, with +66% envisaging more of the same next year.
Tenant demand was up in the lettings market, with a net balance of +48% of respondents citing a rise. Meanwhile, landlord instructions fell according to -24% of participants. Given this mismatch between rising demand and dwindling supply, a net balance of +49% expect rents to increase firmly over the near term.
Simon Rubinsohn (main pic), RICS chief economist, says the issue of supply is increasingly important. “Critically, the theme runs strongly both through the latest set of contributor comments as well as the data around new instructions and the decline in inventory on agents’ books,” he adds.
“Unless this trend is reversed soon, transaction levels may flatline in 2022 with limited choice proving more significant than any shift in the interest rate environment for new buyers.”
RICS expects the imbalance compared to demand to remain a key factor supporting prices. “Even if the cost of mortgage finance does begin to edge up, it is likely that house prices will continue to move higher through the coming year, albeit at a somewhat slower pace than over the past 12 months,” says Rubinsohn.