News: UK property "pauses for breath" this summer

Fri, 15 Aug 14

Demand for new homes fell slightly in July, the first monthly decline since January 2013, while the supply of new properties coming onto the market increased for the second consecutive month, according to the July RICS Residential Market Survey.

The result is the opposite of the imbalance that has fuelled the housing market’s rapid growth in recent months. Indeed, house price growth across the UK now appears to be moderating, with a net balance of 49 per cent more respondents reporting an increase in prices in July (compared to 52 per cent in June and 56 per cent in May).

Where London was once leading the acceleration, now the capital has suffered the sharpest downturn, with enquiries falling at their fastest rate since April 2008 and a net balance of 10 per cent more respondents reporting an increase in prices (down from 30 per cent in June).

The average number of sales per chartered surveyor, however, increased to 24.6 (up from 21.1 at the start of the year) and sales expectations remain positive across the country, albeit a little less so than previously.

While there is a little more member caution reflected in the comments, prices are still projected to rise nationally over the next year and expected to increase by 2.6 per cent in the next 12 months, a positive forecast, albeit down from 4 per cent at the start of 2014. Surveyors in Scotland, where prices are now outpacing the rest of the UK, are the most confident about future value increases.

Simon Rubinsohn, RICS Chief Economist, said: "A range of policy initiatives adopted by the Bank of England in recent months alongside heightened expectations surrounding a turn in the interest rate cycle has clearly had an impact on sentiment in the market. The shift in the mood music amongst potential buyers in the London market has been particularly pronounced but that is in a sense consistent with the move to a more sustainable market in the capital."

A further report from Home.co.uk this week confirms the rise in supply of property for sale and slowing of price rises. Doug Shephard, director at Home.co.uk, commented: "Record prices in Greater London have tempted many more potential vendors to sell. Supply is up 39% year-on-year in the capital region but one must remember that it is rising from an ultra-low level. To put the current number of properties entering the market into context, we need to look further back. 14,270 properties entered the market last month, which is 31% less than the 20,615 properties that were placed on the market in August 2008.  Such is the demand for property in London that supply would need to increase much more before price stability was seriously threatened.

"If we look at the wider supply-demand dynamics across the whole country, it is clear that buyer demand is certainly lower than it was before the financial crisis of 2007, but supply remains very low indeed. On the demand side, mortgage lending is working (and more responsibly) and interest rates remain very favourable for the time being. Supply, on the other hand, has increased by just 6% over the last 12 months across the UK. Outside of London, the largest rises in supply were found in the West Midlands and in Wales (+9% and +8% respectively year-on-year). Such modest increases, from what is a record low level, are hardly likely to cause a crash any time soon, but they will help tame price rises and that will both help stabilise the market and be welcome news for aspirant buyers.”

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