RICS UK Residential Market Survey – May

The May 2021 RICS UK Residential Survey results point to a widening disparity between demand and supply within the market, with the flow of new listings deteriorating over the month while buyer enquiries rose at a solid rate. As such, these dynamics continue to exert a considerable amount of upward pressure on house prices, as respondents across all parts of the UK reported a strong pick-up once again.

Across the UK as a whole, a net balance of +32% of survey participants noted an increase in new buyer enquiries during May, marking the third successive positive monthly reading for this indicator. Although the latest figure has eased slightly compared to +45% last time round, it remains consistent with a solid uptick in demand nonetheless.

Alongside this, newly agreed sales also rose over the month, evidenced by a net balance of +30% of contributors reporting an increase. Again, this measure has cooled slightly compared to a return of +47% posted two months prior, but is still signalling strong momentum behind sales at present. That said, when looking to the future, the near term sales expectations net balance moderated to just +10% in May (from +21% last month), suggesting growth in sales volumes may soften a little further in the coming three months once the Stamp Duty holiday begins to be tapered out through to September. What’s more, at the twelve month time horizon, sales expectations have now turned flat, registering a net balance of -5% compared to +12% previously.

Conversely, there has been no sign of house price inflation losing any steam up to now. In fact, the headline net balance rose to +83%, up from +76% beforehand, representing a fourth successive month in which upward pressure on house price has seemingly intensified. When disaggregated, all parts of the UK continue to display strong feedback regarding house price growth, with exceptionally sharp readings being posted in Northern Ireland, the South West and North West of England, as well as in Wales.

Going forward, a national net balance of +45% of respondents envisage a continued rise in house prices over the near term (virtually unchanged from a figure of +47% previously). Likewise, twelve month price expectations remain elevated, with a net balance of +64% of contributors anticipating an increase over the year to come.

Underpinning the recent acceleration in price growth, new instructions coming onto the market have become increasingly scarce over recent months, with the latest net balance coming in at -23% (down from a figure of -4% in April). Consequently, the gap between the new buyer enquires and new instructions series is now at its widest since November 2013, signalling a real mismatch between supply and demand. In terms of the pipeline for fresh listings going forward, survey participants are reporting that the number of market appraisals being undertaken is up on a twelve month comparison (net balance +24%), which could translate into an improved number of sales instructions in due course.

In the lettings market, tenant demand growth remains firm at the national level, with the latest net balance standing at +48% in May (+56% in April). At the same time, the survey’s indicator on new landlord instructions remained in negative territory for a tenth consecutive month. On the back of this, a net balance of +55% of respondents foresee a pickup in rents over the near term. Over the next twelve months, contributors continue to pencil in around 3% growth in headline rents. Meanwhile, the outlook appears to be recovering somewhat in London, with both the three and twelve month rental growth expectations series moving into positive territory

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