RICS UK Residential Market Survey – December

The December 2020 RICS UK Residential Survey results continue to point to rising activity across the market, even if the pace of growth has softened noticeably compared with earlier in H2. That said, sales expectations have retreated according to the most recent feedback, with respondents anticipating the latest lockdown restrictions (and the related economic challenges), coupled with the ending of the Stamp Duty holiday, to weigh on activity going forward.

In terms of new buyer demand, a headline net balance of +15% of survey participants saw an increase in enquiries during December. Although still positive and therefore indicative of some degree of uplift in demand, this latest reading is down from +26% last time out and has now moderated in five successive reports.

Meanwhile, the flow of new instructions being listed onto the sales market continued to pick-up over the month, albeit modestly, evidenced by a national net balance of +7% of respondents reporting an increase. Alongside this, the number of appraisals being undertaken remains higher than in the comparable period of 2019, with the December net balance also coming in at +7%. Nevertheless, in both cases, these indicators have softened over recent months in another sign that momentum has eased of late since April 2020. Further ahead, at the twelve month time horizon, sales expectations are only marginally negative, posting a net balance of -6%.

The survey’s indicator on agreed sales returned a net balance reading of +18% in December, compared with +24% previously. As such, this represents the seventh consecutive positive monthly reading, albeit growth has clearly softened relative the summer and autumn periods (during which the net balance hit a high of +60%). Looking ahead, near term sales expectations slipped further to post a net balance of -22% at the headline level.

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.

in part reflecting the renewed pressures induced by the pandemic in recent weeks, this latest figure is down from -6% in November and is the weakest.

House prices continue to be driven sharply higher for the time being, with a net balance of +65% of respondents citing a rise in the latest report. Indeed, the national net balance has now remained in a tight range of between +61% and +65% in each of the last four months, continuing to signal significant upward pressure on house prices across the UK as a whole. When disaggregated, London is the only region where house price inflation appears somewhat muted, with the latest net balance across the capital coming in at just +7% (down from +13% previously).

Going forward, contributors foresee momentum behind house prices fading significantly over the near term. The three month expectations series fell noticeably in December, returning a net balance of -13% at the national level (the softest since May 2020). Notwithstanding this, the twelve month view remains comfortably positive, with a net balance of +24% of respondents anticipating national house prices will be higher in a year’s time.

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