RICS UK Residential Market Survey – May

With estate agents in England being permitted to reopen on the 13th of May, the latest RICS Residential Market Survey results point to a slight improvement in the outlook for sales over the coming twelve months. That said, the latest reading is up from -48% in April. Meanwhile, landlord instructions continued to fall sharply, extending a trend that long predates the impact of the Covid-19 outbreak. Near term expectations continue to point to rents falling over the coming three months, albeit negativity has diminished somewhat, with the net balance moving to -11% from -39% previously. Given the economic uncertainty caused by the pandemic, overall sentiment remains cautious.

In terms of new buyer enquiries, the headline net balance moved from a record low of -94% in April, to post a reading of -5% in May. As such, this indicator is consistent with a much more stable demand picture over the month. Alongside this, although the newly agreed sales indicator remained in negative territory (net balance -35%), the latest reading was significantly less downbeat than that returned last month (net balance -93%). Similarly, despite a net balance of -20% of contributors reporting that new instructions coming onto the market continued to fall in May, this is noticeably less negative compared to the reading of -97% last time out. It is important to highlight that current activity metrics did not see any meaningful changes in Scotland, Northern Ireland and Wales, where restrictions on estate agents were not removed in May.

Looking ahead, near term sales expectations turned broadly neutral in May, with the net balance coming in at -4% (up from -58% previously). Further out, twelve- month sales expectations are now slightly positive, as a net balance of +10% of contributors now envisage sales picking up (-6% in the April results).

In an extra question included in the May survey, contributors were asked for their views on potential shifts in the desirability of certain features of properties over the next two years (owing to recent events). As shown
in the chart below, 81% of respondents feel there will be an increase in desire for properties with gardens or balconies. At the same time, 74% feel there will be a shift in demand towards homes located near green spaces and 68% are of the opinion that properties with greater private and less communal space will become more desirable.

At the other end of the scale, 78% of respondents sense there will be a fall in the appeal of tower blocks and
58% feel properties located in highly urban areas will be less enticing in the future. Interestingly, the majority of survey participants expect there will be no change in the desirability of homes located near transport hubs.

With regards to house prices, the survey’s headline price indicator (capturing changes over the past three months) moved deeper into negative territory. Indeed, the national net balance slipped to -32% compared to a reading of -22% in April, representing the weakest monthly figure going back to 2010. Going forward, near term price expectations remain downbeat, albeit to slightly lesser degree than beforehand, with the net balance standing

In the lettings market, tenant demand was down over the month according to a net balance of -12% of respondents (non-seasonally adjusted monthly series). Even so, -43%. Furthermore, twelve-month price expectations also remain negative, evidenced by a net balance of -16% of survey participants anticipating prices will fall over the year ahead.

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