RICS UK Residential Market Survey – September

The September 2020 RICS UK Residential Survey results continue to point to a strong upturn in activity across the market, as indicators on enquiries, agreed sales and new listings all remain strongly positive. Nevertheless, respondents still foresee sales weakening further ahead amid the challenging macro economic environment, evidenced by the twelve-month expectations series moving deeper into negative territory in the latest returns.

During September, a headline net balance of +52% of survey participants reported an increase new buyer enquiries. This marks the fourth consecutive monthly pick-up in demand, albeit the latest reading represents a slight moderation compared to net balances of +75% and +63% posted in July and August respectively.

Similarly, new instructions coming onto the sales market also rose for a fourth month in a row, which now signifies the longest stretch of rising supply going back to 2013. Furthermore, with a net balance of +48% of contributors reporting that appraisals are up in annual terms, the pipeline for instructions over the coming months appears to be solid. Even so, it should be noted that, despite the recent improvement, stock levels remain relatively low in

Alongside this, a net balance of +55% of respondents noted an increase in agreed sales over the month (broadly in-line with August’s reading of +61%). Moreover, the regional breakdown shows that sales continue to rise across all parts of the UK, led by exceptionally strong growth in East Anglia, the South West and Yorkshire & the Humber.

When it comes to the near term outlook, respondents expect the upturn in sales will continue over the coming three months, with the latest net balance coming in at +17% compared to +21% previously. However, this near term assessment
is becoming increasingly at odds with the longer term view. Indeed, twelve month sales expectations moved deeper into negative territory, posting a net balance of -34%, down from -17% in August. Unsurprisingly, contributors continue to cite potential job losses across the economy once the furlough scheme is withdrawn as a significant risk for market activity further ahead. A historical context (averaging 42 properties per estate agent branch).

Looking ahead, a net balance of +23% of contributors envisage prices continuing to rise over the coming three months at the national level. Likewise, twelve month price expectations remain in modestly positive territory, although sentiment on the outlook does vary by region. Whereas areas such as the North West and Wales display very strong expectations for prices in the year to come, projections are flat to slightly negative in the North East, Yorkshire & the Humber, the West Midlands and London.

In the lettings market, tenant demand reportedly rose for the fourth month in succession (non- seasonally adjusted monthly series). That said, while respondents saw a pick-up in tenant demand across all parts of the UK last month, London now stands out as the only area in which a negative trend in tenant demand was cited in September.

This recent dip in demand has been reflected in short-term rental growth expectations across the capital, with a net balance of -67% of contributors anticipating rents in London will fall over the next three months. By way of contrast, the national three-month rental expectations indicator returned a positive reading of +19%.

Notwithstanding this, house price growth continues to gain momentum, as the survey’s headline indicator on prices climbed once again to post a net balance of +61% (up from +44% last time). What’s more, all parts of the UK are now seeing prices rise to a greater or lesser degree, albeit the rate of house price inflation appears to be more modest in London compared to all other regions.

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