Housing Market Activity Continues to Rise but Momentum is Easing

  • Sales, new enquiries and instructions remain positive, but impetus has cooled
  • House prices continue to rise across most parts of the UK, except for London
  • Near term expectations suggest sales market momentum will fade further in coming months

Homebuyers are still searching for new properties as +15% of survey participants saw an increase in new buyer enquiries during December. Although still positive, the reading is down from a net balance of +26% in November and has now moderated in five successive reports. Also, the number of new properties being listed for sale picked-up over the month, with a net balance of +7% of respondents reporting an increase.

Growth in the number of appraisals being undertaken has softened over recent months but they remain higher than in the comparable period of 2019, with the December net balance coming in at +7%. Alongside this, agreed sales continued to increase, with +18% of respondents reporting a rise, but again at a slower pace than in November. This is the seventh consecutive positive monthly reading, but growth has eased off relative to the summer and autumn periods. (net balance of +60%)

Likely in part linked to the renewed pressures induced by the pandemic in recent weeks, near-term sales expectations slipped further to post a net balance of -22% across the UK and is the weakest since April 2020. Looking further ahead, at the twelve-month time horizon, sales expectations are only marginally negative, posting a net balance of -6%.

House prices continue to increase, with a net balance of +65% of respondents citing a rise in the latest report. The national net balance has now remained between +61% and +65% over the last four months, signalling significant upward pressure on house prices across the UK. London is the only region where house price inflation appears muted, with the latest net balance for the capital showing just +7% (down from +13% previously). Contributors foresee momentum behind house prices fading significantly over the near term, but the twelve-month view remains positive, with a net balance of +24% of respondents anticipating house prices will be higher.  

In the lettings market, a headline net balance of +15% of contributors saw tenant demand pick up during December (non-seasonally adjusted monthly series). At the same time, landlord instructions being brought onto the rental market continued to dwindle, with a net balance of -12% of respondents seeing a decline. As a result, rental growth expectations for the coming three months strengthened slightly, as contributors across virtually all parts of the UK envisage rents rising over the near term. As has been the case for a number of months now, London remains a clear exception, where a net balance of -47% of participants anticipate rents declining in the three months ahead.

Simon Rubinsohn, RICS Chief Economist, said: “Although the housing market remains open for business in the midst of the latest national lockdown, there is a sense from respondents to the survey that the new restrictions will still impact on transaction activity over the coming months. This is most visible in the negative reading for sales expectations over the next three months when typically, with the expiry of the stamp duty holiday approaching, this series would be expected to remain firmly in positive territory.

“Looking beyond this immediate time horizon, the feedback from RICS members is that the uplift in prices over the past year will be sustained, for good or ill, as the macro picture gradually improves on the back of the rollout of the Covid vaccination programme. More significantly, private rents are envisaged to outpace price gain as supply continues to fall short of demand with anecdotal reports of landlords exiting the market.”


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