RICS UK Residential Market Survey, November 2016
Tax changes continue to impact the higher end of the market as supply continues to dwindle.
A lack of stock continues to drive up house prices across the West Midlands according to the latest Residential Housing Market Survey from the Royal Institution of Chartered Surveyors (RICS).
For the eleventh consecutive month chartered surveyors have reported a decline in new homes coming onto the market in the region. This lack of stock is ultimately driving up prices with 58% more respondents reporting price rises over the past three months across the West Midlands. Further price increases are expected for the coming three months, albeit the pace of growth is anticipated to ease slightly.
For the second consecutive month the West Midlands reported the strongest price growth across the UK, alongside the North West. London, Wales and the North East were the only regions to report a fall in prices.
The number of prospective buyers in the region’s housing market has increased for the third month in a row in November, but the pace of increase remains only modest with 14% more surveyors reporting a rise in new buyer enquiries instead of a fall.
The rise in demand during November led to a further rise in agreed sales across the West Midlands. 28% more respondents across the region reported growth in activity over the month but while this is the highest reading since February, caution remains, according to anecdotal feedback.
Supply shortages and the growth in sales activity, albeit only modest, alongside a lack of new instructions, have led to a further decline in homes for sale. Anecdotal comments suggest that many respondents expect the beginning of 2017 to be quiet reflecting the lack of fresh properties coming to market.
Colin Townsend MRICS of John Goodwin commented: “There is still a sustained demand for an ever shrinking supply of homes coming onto the market. Stocks are as low as they have been for many years and whilst 2016 has been an extremely productive year the shortage of supply going into 2017 suggests that prices will rise again.”
Simon Rubinsohn, RICS Chief Economist, said: “A key issue for the housing market is the slowdown in transaction activity since the spring which is clearly being reflected in the RICS agreed sales data as well as in the official figures. Although there are some signs that the numbers may begin to edge upwards in the new year, the combination of macro uncertainty, the on-going supply shortfall, with stock levels around historic lows, and the myriad of tax changes impacting on buyers suggest that any pick-up in activity will be relatively modest. This is significant not just for the housing market itself but also for the wider economy given how much of consumer spending is tied in with home purchases.”
In the lettings market, tenant demand continues to outstrip supply, particularly in areas seen as desirable, Knight Frank’s tenant survey which asked 3,000 tenants across the UK about their choices when deciding on a rental property, showed that while affordability was still a key priority, proximity to transport and place of work was particularly important to younger tenants.
Another aspect thrown up by recent research is the changing demographics when looking at the rental sector as a whole. Due to changing work and career patterns many young professionals who would traditionally have bought a property are switching to rental, adopting a more continental model, this trend allied with overseas students, often from more affluent families, is pushing the demand for rental properties of a higher standard than the traditional model.
The slowdown in the buy- to- let sector as small landlords who had seen a rental property as the safest way to maximise return on investment, feel the cold winds of tax changes is also putting pressure on the supply of rental properties.
Following a stampede of buy-to-let activity earlier this year ahead of the introduction of the higher tax on additional homes in April, fewer investors are now adding to their property portfolios. The latest seasonally adjusted monthly figures compiled by the Council of Mortgage Lenders show that the amount buy-to-let landlords borrowed fell on an annual basis, dropping 22% year-on-year to £2.8bn in September with the number of loans falling 6% from the previous month to 18,200 and representing a decline of 26% on September 2015.
One way to help get the market moving again would have been to amend or abolish the 3% stamp duty surcharge on buy-to-let properties and second homes.
Despite Christmas approaching 11% more chartered surveyors reported a rise in tenant demand. New instructions continue to fall with anecdotal evidence suggesting agents are waiting on clarification from the Chancellor’s latest Autumn Statement.