Record low stock numbers, political uncertainty and the aftermath of tax changes are obstacles hindering the East Midlands housing market, according to the RICS UK Residential Market Survey, with sales activity subdued during the month of July.
In July sales activity continued to lack momentum, with the net balance readings for buyer enquiries and agreed sales remaining relatively flat, at 6% and -8%, respectively.
Respondents are not anticipating activity in the sales market to gain impetus at this point in time, with both three and twelve month expectations series pointing to little change.
The main element holding back the market continues to be a sustained deterioration in the flow of fresh listings.
Despite new instructions in the East Midlands seeing a slight increase this month (with 6% more respondents noting a rise) average stock levels on estate agents’ books remain close to record lows, limiting choice for potential home buyers.
The headline price growth gauge for the East Midlands continues to defy the UK trend with 27% more respondents reporting prices to rise (instead of a fall) over the course of the previous three months. The national figure slipped from +7% to +1% and represents the softest reading since early 2013.
By way of contrast, the price net balance reading for central London remains negative with the pace of decline broadly matching that of the previous three months.
Moreover, chartered surveyors are starting to report early signs of this flatter trend permeating outside the capital, as the price balance for the South East of England fell into negative territory, posting the weakest reading for this part of the country since 2011.
In an extra question, contributors to the July survey reported on sales prices in comparison to their asking price. Nationally, homes at the top end of the market (those listed at more than £1million) saw the greatest deviation in agreed prices, with 68% of respondents reporting sales prices coming in below the asking price. Whilst this is not uncommon in a flatter market, 33% of respondents said the agreed price was up to 5% below the asking price and 26% reported between 5% and 10% under.
Looking ahead, near term price expectations continue to signal stronger growth across the East Midlands over the coming three months in comparison to many parts of the UK.
In the lettings market, the quarterly figures, also portray a more subdued picture. Tenant demand continued to edge higher, while landlord instructions continued to fall with 13% of respondents reporting a decline instead of an increase in listings.
The sustained lack of supply means rents are expected to grow, albiet only modestly in the coming three months. And looking a little further they are projected to increase by a little over 2% over the next twelve-month point.
Simon Rubinsohn, RICS Chief Economist, commented: “Sales activity in the housing market has been slipping in the recent months and the most worrying aspect of the latest survey is the suggestion that this could continue for some time to come.
“One reason for this is the recent series of tax changes but this is only part of the story. Lack of new build in the wake of the financial crisis is a more fundamental factor weighing on the market. And there are some very real consequences for the economy from all of this including the impact on the ability of people to be mobile when looking for work.
“The flatter trend in price growth is arguably a silver lining but there is no real indication that the housing market will become materially more affordable anytime soon.
“Hence the need for the government to press ahead with the Build to Rent initiative as well as continuing to focus on other tenures alongside home ownership to try address this critical issue.”