RICS: New buyer demand continues rise

December saw the fourth successive positive monthly reading, although feedback points to only marginal growth throughout this period.

RICS: New buyer demand continues rise

At the national level, 9% of respondents cited an increase in new buyer demand during December, according to the latest UK Residential Survey from the Royal Institution of Chartered Surveyors (RICS).

 

This was the fourth successive positive monthly reading, although feedback points to only marginal growth throughout this period.

During December, a net balance of -14% of contributors noted a decline in new listings, continuing a sequence of negative readings for this metric into a ninth consecutive month.

Despite the slightly positive demand trends seen over the past four months, agreed sales dipped once again, with the latest net balance standing at -13%, compared with a reading of -9% returned previously.

Going forward, however, +14% of respondents foresaw sales volumes returning to growth over the next three months.

At the 12 month time horizon, +16% of survey participants expected sales to increase, up slightly on +12% last month.

With respect to house prices, +69% of survey participants saw a further increase during December. This is virtually unchanged from last month’s reading of +71%.

RICS' price expectations for the coming 12 months remained elevated at the national level, with the December net balance registering a value of +67%, more or less identical to November’s reading of +66%.

All parts of the UK are anticipated to see a continued rise in house prices over the year ahead, with expectations particularity elevated in Scotland and the South West - displaying net balance readings of +88% and +84% respectively.

Landlord instructions remained thin on the ground, evidenced by 27% more respondents noting a decline rather than an increase.

As a consequence of the persistent disparity between demand and available supply on the lettings market, near-term rental growth expectations rose further to post a net balance of +57% in December.

Tomer Aboody, director of MT Finance, said: "As we headed towards the end of last year, it was the same old story that had prevailed for many months and continues today – lack of stock, which is inevitably pushing up property prices.

"If there are several buyers (or more) competing for a property, it stands to reason that this will lead to a higher sale price. Cheap mortgages have helped buyers push themselves to afford that property with more space.

"While rising prices is only good news for homeowners who aren’t moving, the lack of pick-up in transactions is more worrying.

"Mobility is essential, whether that’s getting on the ladder for the first time, moving up it to buy a bigger home in which to raise a family, moving across the country for work or downsizing when you no longer need that big family home.

"The inability to do these things stops the market from functioning effectively and until a solution is found, such as removing stamp duty for downsizers, it is hard to see this situation changing."

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added: "The RICS housing survey has nearly always proven to be a reliable indicator of market trends and this month's is no exception.

"On the ground, demand is still increasing – especially for houses – as many buyers try to come to terms with a new 'normal' as far as their hybrid work and commuting patterns are concerned.

"Valuation requests and listings are increasing as we would expect at this time of you but not fast enough to keep up.

"However, rising inflation and interest rates, and the impact of these on real wages, are fuelling concerns about longer-term affordability.

"As a result, we expect property prices to rise further, particularly while stock shortages are providing support, but more modestly than last year while transaction numbers will sadly suffer too."

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Vanishing landlords are piling on the pressure for renters. As demand expands and supply shrinks, rents are going through the roof, and it couldn’t come at a worse time.

"Agents reported that the number of prospective tenants continues to rise, while the number of landlords dwindles. Tax treatment when they buy, make rental income and when they sell are all persuading landlords that there are more tax-efficient ways to invest their money. They’re also taking advantage of price rises since the onset of the pandemic to cash in.

"Others have moved to the short-term lettings market to take advantage of the boom in domestic holidays, and the higher rents available on a weekly or nightly basis.

"This means rents are on the rise again, and the survey respondents expect significant increases across the UK. The HomeLet Rental Index shows the average monthly rent is up 8.3% in a year to £1,060, and rises in some parts of the country are in double-figures.

"This was reflected by one agent’s comments in the RICS report that said they can add 15% to current rents and easily find tenants.

"Given that rent already swallows a third of the income of renters, this could cause real hardship for those forced to hike rental payments. And at a time when the price of energy, petrol and food is rising dramatically, higher rents are the last thing they need.”

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