RICS UK Residential Market Survey

The January 2020 RICS Residential Survey results signal a continued improvement in market activity over the month, with indicators on demand, sales and fresh listings all moving further into positive territory. What’s more, respondents across all regions remain optimistic that sales volumes will continue to gain momentum over the next twelve months.

Starting with new buyer enquiries, a net balance of +23% of survey participants reported an increase in demand during January (building on a positive reading of +19% in December). The vast majority of regions saw a noticeable pick-up in buyer enquiries during January, albeit trends remained a little flatter in Yorkshire and the Humber as well as in the North West.

Agreed sales also rose for a second month in succession at the national level, evidenced by a net balance of +21% of respondents reporting an increase. Again, most parts of the UK were said to have seen solid growth in sales, led by particularly firm readings in the West Midlands, Northern Ireland and Wales. Looking ahead, sales expectations are now comfortably positive across all UK regions/countries, both in the near term and at the twelve month horizon.
Alongside this, the flow of new instructions coming onto the market also increased during January, with a net balance of +19% of contributors noting a rise (up from +11% previously). Furthermore, a net balance of +20% of respondents nationally reported that the level of market appraisals undertaken over the month was higher than a year ago, marking the first positive reading for this series since it was introduced back in 2017. Going forward, this should bode well for the pipeline of new instructions over the coming months. Even so, this improvement in the volume of listings coming onto the sales market follows a protracted period of falling supply, meaning average stock levels on estate agents books remain very low when placed in a historical context (at 43 properties).

On the back of the stronger trends in market activity, house price pressures appear to be building. Indeed, the headline price net balance moved up to +17% in the latest report (compared with a reading of -2% in December). Driving this pick-up, house price inflation gauges moved into positive territory in both London and the South East during January, having been stuck below zero throughout much of the past few years. Elsewhere, Northern Ireland and Scotland currently display the strongest growth in house prices across the UK (in net balance terms).

As to the future, expectations point to house price inflation gathering pace, both in the near term and over the year to come. Moreover, respondents anticipate prices increasing, to a greater or lesser degree, across all parts of the UK during the next twelve months.

That said, the higher priced tiers of the market still appear to be faced with slightly tougher conditions at present. In fact, 56% of contributors report that sales prices are still coming in some way below asking, albeit this is noticeably less than 67% back in October 2019. Conversely, for properties listed on the market at £500k and below, 63% of survey participants note that sales prices are coming in at least level with asking prices (broadly unchanged from trends reported in October).
In the lettings market, tenant demand rose at a steady pace in the three months to January (seasonally adjusted quarterly series), with a net balance of +24% of respondents citing an increase. At the same time, landlord instructions were reported to have fallen by a net balance of -13% of contributors, extending a run of negative readings for this series into a fifteenth straight quarter. Given this mismatch between rising demand and falling supply, rents are expected to increase over the coming three months, while twelve-month expectations continue to point to rents rising by a little over 2% in the year ahead.

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