Prices affected by growing demand & contracting supply
House prices continue to be squeezed higher by growing demand and contracting supply, according to the latest RICS UK Residential Market Survey.
The report shows that while 44% more chartered surveyors saw prices rise in July, supply to the market continued the decline with 22% more surveyors reporting a drop in new instructions.
Additionally, the shortage of housing inventory worsened further during July, with the average number of properties for sale per surveyor slipping to a record low. Consequently, all areas of the UK are projected to see sizeable house price gains over the next twelve months, with confidence most elevated in East Anglia and Northern Ireland.
Near term expectations for prices also continue to reflect the imbalance between demand and supply with 41% of members expecting prices to continue to rise over the next three months. However, rising prices have not dampened interest as new buyer enquiries rose for the fourth month in succession, with 25% of respondents reporting a rise in demand.
Despite this steady and sustained improvement in demand, newly agreed sales were more or less unchanged at the national level in July. Going forward, there is a little more optimism regarding the prospects for activity with 37% more respondents expecting sales to gain momentum over the next three months and 40% more taking the same view on a one year perspective.
This government has put home ownership at the very heart of its agenda, with Starter Homes and extending Right to Buy the strongest evidence of that ambition. However, this continues to be demand driven and fails to address the real issue of supply.
A coherent and coordinated house building strategy is required across all tenures. This should include measures that will kick-start the supply-side, such as mapping brownfield, addressing planning restrictions and creating a housing observatory to assess the underlying economic and social drivers of housing and provide the impetus for solutions.
The changes brought in through Fixing the Foundations, the Chancellor’s productivity plan, were welcome and refreshingly on the supply side – such as zonal planning, dispute resolution for S106 and local plan enforcement. But these alone are not a strategy for increasing housing supply across all tenures.
In the lettings market, tenant demand continued to rise while landlord instructions, despite increasing slightly, failed to keep pace once more. Consequently, 34 % of respondents expect rents to increase right across the UK with members in the West Midlands (4%) and the South East (3.3%), projecting the sharpest growth over the next twelve months.
Jeremy Blackburn, RICS Head of Policy