Confidence is starting to recover following the immediate reaction to the EU Referendum, as the UK residential property market experiences a slight upturn in August, according to the latest Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey.
The August 2016 Survey shows a pick-up in confidence, following the significant drop in activity and price expectations in the wake of the EU vote. At the national level, both prices and sales are expected to rise over both the next three and twelve months as activity in the market stabilises.
Last month, 12% more respondents nationally reported an increase in prices (up from +5% in July). Although this reverses a run of five consecutive surveys in which the net balance has decelerated (from a high of 50% in February), it is still the second weakest reading over the past 18 months.
In London, the price net balance remained in negative territory for a sixth consecutive month, with 30% more respondents noting a fall in prices over the period, as opposed to a rise. By way of contrast, prices increased in most other parts of the UK.
Looking ahead, price expectations over the next three months nationally moved into positive territory for the first time since April with 10% more respondents now anticipating an increase over the period.
This slightly stronger picture is also reflected in price expectations for the coming year with modest increases anticipated in most parts of the country away from the capital.
Following a couple of months in which sales declined sharply in the aftermath of the referendum, volumes stabilised during August, as the agreed sales indicator improved to zero from -32%. That said, sales still appear to be falling in some parts of the country. Going forward, sales expectations improved noticeably, posting the strongest reading since February and furthermore, sales projections at 12 months have now climbed out of negative territory across all areas of the UK.
A key factor in supporting the rising prices is the continued shortage of stock for sale. This looks set to continue as new instructions declined once more during August. As a result, stock on estate agents books slipped for the third month in a row and is now approaching the record low posted in December last year.
New buyer demand also decreased slightly across the UK as a whole, although the pace of this decline has eased significantly. A net balance of -7% more chartered surveyors have reported a fall in demand in August (up from a net balance of -25% in July).
Simon Rubinsohn, RICS chief economist, said: “There are clear signs that the housing market is settling down after the initial surprise of the outcome to the EU referendum. Buyer enquiries did dip again in August but only modestly, and more significantly, sales expectations are beginning to edge upwards once again. It is likely the swift response from the Bank of England, both in terms of the lowering of the capital buffer and the cut in interest rates, has played a role in helping to support confidence.
“The more assured mood is also reflected in some of the longer term RICS indicators although this in itself could serve to re-ignite ongoing concerns surrounding affordability with five year projections for both prices and rents in the latest survey back to their highest level since May.”