Demand slips in London and new instructions from sellers are flat in May
Enquiries from new buyers, agreed sales, house prices and expectation all declined once more during may across the capital according to the latest RICS UK Residential Market Survey. In addition, new instructions from those wanting to sell were flat in London.
Although a fall in property coming on to the London market is a recurring theme over much of the past two years, anecdotal evidence from respondents to the survey in May suggests this month’s reading may have been impacted by the General Election, as some adopt a wait and see approach. In May 1% more respondents cited a decline in fresh listings (compared to those reporting a rise), in-line with a trend of flat or subdued readings for the past 9 months, in London. Alongside this, new buyer enquiries fell, having remained stagnant over much of the past eight months. As with new sellers, a large portion of contributors suspect the General Election is having an adverse impact on demand.
At the same time, agreed sales in London continued to decline for a third month running with 23% more respondents seeing a fall (compared to -15% previously).
Going forward, near term sales expectations imply a slight decline over the coming three months, but beyond this over the next twelve months, respondents appear slightly more optimistic with a net balance of 32% anticipating an increase in activity.
Prices continue to slip in central London with 51% more respondents observing a fall rather than rise in prices. Looking ahead near term price expectations have also slipped in the capital, posting a net balance of -44% in May from -24% in April (the third straight report in which this indicator has softened).
Further out, over the next five years, respondents envisage house price inflation averaging 3.5% per annum in the capital.
In the London lettings market, tenant demand dropped in May (on a non-seasonally adjusted basis), while new landlord instructions were again broadly flat. 28% more respondents in London expect rents to fall (rather than rise) over the coming three months and in terms of twelve month expectations, contributors are pencilling in little change in headline rents over the year ahead.
Simon Rubinsohn, RICS Chief Economist, commented: “Although the latest survey suggests that uncertainty related to the General Election may have contributed to what appears to have been a disappointing level of transactions in the housing market over the spring, perhaps the most ominous signal emanating from the data released today is that contributors still expect house prices to increase at a faster pace than wages over the medium term despite the difficulty many first time buyers are clearly having in taking their first steps onto the property ladder.
“The increasingly tight second hand market remains a cause for concern with the RICS series tracking new instructions to agents recording its fifteenth successive negative reading. It is hard to see this as anything other a major obstacle to the efficient functioning of the housing market.”