Buyer demand begins to lose steam

Housing demand is continuing to rise, although the pace of growth appears to be moderating, according to the latest RICS residential market survey.

RICS says its November survey results remain consistent with a solid trend in sales activity across the market, even if the sharp growth in buyer demand reported over recent months “appears to losing a bit of steam”.

For the time being, prices continue to be driven sharply higher in most parts of the UK, although near-term expectations for both prices and transactions point to a more moderate picture emerging over the coming months.

At the national level, a net balance of +27% of respondents cited an increase in new buyer enquiries during November. While still comfortably positive, this latest return is down from a figure +42% in October and has now eased in four consecutive months following the recent high of +75% posted in July.

Alongside this, fresh listings coming onto the sales market continued to rise, marking the sixth month in succession in which new instructions have picked up at the headline level, albeit the latest monthly rise reported was the smallest throughout this stretch.

Meanwhile, a headline net balance of +25% of survey participants saw an increase in agreed sales over the month, compared to a reading of +41% in October. Sales continue to rise across most parts of the UK according to survey feedback, with Wales and Northern Ireland still seeing particularly strong growth. That said, some areas such as the West Midlands, East Midlands and Scotland have begun to see a flatter trend emerge, as the latest readings fell out of positive territory.

Looking ahead, near term sales expectations have now turned broadly neutral at the national level, pointing to a leveling out in sales over the coming three months. Further ahead, at the twelve month horizon, sales expectations remain negative, with a net balance of -21% of respondents foreseeing weaker sales volumes next year. Comments left by contributors suggest this downbeat assessment is attributable to the negative employment outlook as well as the withdrawal of the stamp duty holiday after March 2021.

Turning to house prices, respondents continue to report a significant degree of upward pressure. Strong momentum behind house price inflation is being cited across virtually all parts of the UK, led by especially strong feedback in Wales and the South West of England. Although prices are reported to be rising marginally in London, the capital does stand out as having the softest net balance by some margin. The latest figure across the capital stands at +9% compared to a national net balance of +76% when London is excluded.

Back at the UK-wide level, near term price expectations continue to signal a more moderate pace of price growth coming through over the next three months, although expectations strengthened slightly regarding the outlook for the next 12 months.

Tomer Aboody, director of MT Finance said, “The strong performance of the housing market this year has been impressive, particularly when you consider that many would-be buyers have had to contend with being in and out of lockdowns. Regardless, buyers have reacted positively, demonstrating that the desire to move home is strong.

“With transactional volumes still way down on historic figures, it’s not surprising to see prices rise, along with confidence in the future of the housing market.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, added: “On the ground, it seems that housing market activity has hit the buffers in the past few weeks, borne out by the findings in the RICS survey. However, we see this more as a temporary seasonal lull rather than the start of any more serious correction.

“Nearly all previously-agreed sales are proceeding to the usual hurried exchange of contracts before Christmas if possible. Others are planned for soon after so that buyers can take advantage of the stamp duty holiday. We are not finding that prices are being renegotiated downwards either.

“Looking forward, there are potential hazards ahead in terms of worsening economic news and particularly rising unemployment. Yet the prospect of a Covid vaccine and further release of pent-up demand is helping keep new enquiries, although lower than recent months, on a reasonably level path.”