March marks one year and counting of falling demand in UK housing market

The momentum in the UK housing market continues to slow, as buyer demand falls for the twelfth consecutive month, according to the March 2018 RICS UK Residential Market Survey.

Continuing the prevalent trend seen for one year now, interest from would be buyers continued to wane with 17% more respondents seeing a fall rather than rise over the month in a trend dating back to March 2017. This subdued trend is also seen in other key indicators as both new instructions and newly agreed sales remain in negative territory.

One of the main factors impeding demand alongside the ongoing concerns over affordability, is the lack of fresh stock coming onto the market. In March, the flow of properties slowed once again, marking the seventh consecutive month respondents reported a fall in the number of houses being put up for sale. As such, average stock levels on estate agents’ books remains near an all-time low.

Sales also continued to fall in March, with 20% more respondents reporting a fall rather than rise, extending the run of negative readings stretching back to February 2017. Looking at the regional picture, respondents in virtually all parts of the UK noted either a flat or downward sales trend this month.  The year ahead picture does look more positive, however, with 17% of contributors anticipating an increase in sales over the next year at the national level.

Moving to prices, at the national level the price balance remained unchanged coming in at zero,  representing the joint lowest reading since February 2013. Regionally, there continues to be significant variation in the house price indicator.  London, exhibits the weakest feedback, with a net balance of -47% of respondents citing further price declines. Respondents in the South East, East Anglia and the North East, also reported prices to be falling but to a lesser extent than in the capital. Meanwhile, prices continue to drift higher across all other parts of the UK, with Northern Ireland, Wales and the East Midlands seeing the strongest readings.

Looking ahead, the three month outlook for prices remains flat, and continues a trend which was first seen in November last year but further out, the expectation is that prices will resume an upward trend at a headline level with a net balance of +47% anticipating prices to be higher in the coming twelve months.  Regionally, the North West, Wales and Scotland returned the strongest net balances. Unsurprisingly, London remains the only region in which contributors envisage prices falling over this timeframe.

In an additional question this month, respondents were asked whether they had seen an increase in the number of sellers withdrawing their property for sale from the market compared with a year earlier. Nationally, respondents saw no change. However, in London, 55% of respondents reported a rise in the number of properties being withdrawn from the market, (compared with this time last year) with anecdotal evidence suggesting this reflects the differing expectations of buyers and sellers.

Simon Rubinsohn, RICS Chief Economist commented:

“The latest RICS results provide little encouragement that the drop in housing market activity is likely to be reversed anytime soon. Apart from the implications this has for the market itself, it also has the potential to impact the wider economy contributing to a softer trend in household spending. This could make Bank of England deliberations around a May hike in interest rates, which is pretty much odds-on at the moment, a little more finely balanced than would otherwise be the case. The downshift in sales for the time being continues to be more visible in London and the South East with many other parts of the country continuing to show rather greater resilience. Feedback on expectations regarding transactions suggest this divergence will persist over the coming months.”