RICS UK RESIDENTIAL MARKET SURVEY – OCTOBER 2021

The June 2021 RICS UK Residential Survey results point to another solid month for activity across the sales market, even though indicators capturing new buyer demand have eased somewhat as the Stamp Duty holiday moves towards its tapered withdrawal. Crucially, a scarcity of new instructions coming onto the market has become more prominent during recent surveys, with measures tracking fresh listings moving deeper into negative territory over the month.

At the headline level, a net balance of +14% of contributors reported an increase in new buyer enquiries during June. Although this is the fourth successive positive monthly reading, it does represent a noticeable moderation compared to the recent high of +43% posted back in April. What’s more, this easing in momentum is visible across virtually all regions/ countries of the UK covered by the survey.

Nevertheless, the latest feedback continues to signal a clear excess of demand over supply. Indeed, the net balance for new instructions came in at -34% (down from -24% previously) during June, consistent not only with a third consecutive monthly fall in new listings but also pointing to an accelerated rate of decline. While a net balance of +17% of survey participants still note that the number of market appraisals being undertaken is running ahead of the comparable period last year, this gauge has turned slightly softer in each of the past two months (net balance was +34% in April, +24% in May).

Meanwhile, the number of agreed sales picked up once again in June, evidenced by a net balance of +8% of respondents noting an increase. Again, although still positive, the net balance for this metric has eased over recent months, having hit +46% back in March.

Looking ahead, near term sales expectations are now signifying a broadly flat outlook in the three months ahead, with the latest net balance slipping to -4% from +8% last time out. Moreover, the twelve-month sales expectations series returned a net balance of -12% during June (down from -5% previously), suggesting the level of sales activity being conducted across the market in aggregate may now soften slightly over the year to come.

Alongside this, a national net balance of +83% of respondents cited an increase in house prices over the survey period (compared to +82% in May). Comments submitted to the survey frequently highligh that this prices growth is being underpinned by the sheer lack of supply on the market at present. All parts of the UK continue to exhibit strong rates of house price inflation, led by exceptionally robust upward pressure in Yorkshire & the Humber, Northern Ireland and Wales.

With regards to the outlook for house prices, a net balance of +56% of survey participants sense that prices will increase further over the next twelve months. Again, all parts of the UK display elevated price expectations, albeit those returned in London are a touch more modest compared with the rest of the country.

In the lettings market, tenant demand growth seemingly accelerated over the month, with a net balance of +60% of contributors noting a rise (up from a reading of +48% in May). At the same time, the shortfall in new landlord instructions intensified further, as a net balance of -32% of respondents saw a decline (a deterioration on -21% beforehand). As a result, survey participants continue to envisage widespread rental growth going forward, with headline projections standing at +3% for the coming twelve months. In London, twelve-month rental growth projections have now been in modestly positive territory in each of the last three reports, signalling a turnaround relative to the negative assessment for rents being returned earlier in the year.

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