The UK housing market began 2021 on a weaker footing, despite the sector being allowed to remain open during the third national lockdown, with surveyors reporting activity from across the country was down when compared to previous months.
A net balance of -28% of respondents reported a decline in new buyer enquiries in January, which ends a seven-month run of positive returns and signals a noticeable drop off in demand.
There was also a decline in the number of listings, with a net balance of -38% of respondents noting a fall in new properties going onto the market (and the first negative result since May 2020). New appraisals undertaken over the month appeared weaker than this time last year (net balance -26%), suggesting new instructions look challenging as the UK continues to grapple with COVID-19.
Despite the gloomy economic outlook, house prices have been driven up, with a net balance of +50% of participants seeing an increase in January – signalling a significant degree of upward pressure on prices across the UK apart from London. In the capital a net balance of -9% of respondents noted a fall in prices, marking the first negative reading for price growth since July 2020.
January, unsurprisingly, also saw sales of homes drop with an -18% net balance of respondents citing a fall across the UK– indicating a reversal of fortunes for the market after respondents reported positivity in December. In regional terms, contributors in the East Midlands, South West and Yorkshire & the Humber all returned particularly poor readings while the feedback remained more resilient in Northern Ireland.
While the next twelve months for sales appears flat with a net balance of -4%, the nearer term expectations from respondents remain particularly subdued with a net balance of -29% predicting a decline in sales and a challenging period ahead.
In the lettings market, tenant demand increased in the three months to January according to a net balance of +12% of contributors. That said, the pace of demand has moderated across each of the last two reports. Meanwhile, new landlord instructions fell for a second quarter in succession.
Rental growth expectations therefore returned a marginally positive net balance of +12%, regarding the outlook across the UK. Notwithstanding this, respondents from London continue to predict a fall in rents over the coming three months (net balance of -43%).
Simon Rubinsohn, RICS Chief Economist, said: “The latest RICS survey suggests that despite attempts to keep the housing market open through the latest lockdown, there has been perhaps an inevitable impact on the level of activity in the sector with both enquiries from potential buyers and new instructions slipping back.
“That said, actual transaction numbers will remain firm over the next couple of months reflecting the completion of deals that in many cases were agreed through the back end of last year. The appeal of properties with more room and outside space is, meanwhile, a theme that continues to be strongly evident in the responses to the survey.
“Alongside this, renewed concerns are evident regarding the supply of properties in the rental market. Changes in the regulatory framework as well as the tax regime are frequently cited as drivers of this trend which is widely seen as pushing rents higher in most parts of the country despite current affordability concerns.