RICS UK Housing Market Chart Book

Transcription

1 Economics RICS UK Housing Market Chart Book May 17

2 Since the beginning of 17, the headline reading for the RICS House Price series has been largely unchanged with a positive net balance of between 22 and 24. This indicator typically provides a lead over the official measure of house price inflation of around six months and would be consistent with the latter remaining around the % area through the second half of this year. That said, the RICS House Price Expectations series (for the next three months) has eased in recent months with the net balance reading now in low single digits; this would seem to imply that the risks are skewed towards the rate of house price inflation slowing further. Demand has stagnated recently, as measured by the RICS series on New Buyer Enquiries, though is it still exceeding the flow of supply (in net balance terms) as captured by the indicator on New Instructions. Critically, average stock levels on estate agent s books are close to a record low, which is continuing to weigh on the level of activity. This is reflected in the Newly Agreed Sales net balance which has turned slightly negative since the beginning of the year. Alongside this, the near term Sales Expectations series remains only modestly in positive territory. Regionally, the London House Price balance (which tends to have a stronger relationship with the price of property in central London) has been negative since early 16, with activity at higher price points in particular being hampered by changes in Stamp Duty. In contrast, the price balance readings in other parts of country generally remains more upbeat. Prices in the North West have consistently displayed amongst the strongest momentum since the middle of last year according to the RICS data. The rental market is showing a broadly similar trend to the sales market in the sense that Tenant Demand continues to outstrip supply as measured by Landlord Instructions. As a result, rents are expected to increase in all parts of the UK (apart from the capital) with respondents believing that rents will grow at a faster pace than house prices in the medium term. National Residential Market In the first 4 months of 17, the RICS House Price balance has remained within a tight range ( +22% and +24% ), suggesting annual price growth in England and Wales is likely to remain close to current levels through the rest of the year. Whilst the RICS House Price balance has remained steady in the first 4 months of 17, the price expectations net balance has fallen back into low single digits, which suggests that house price inflation might surprise on the downside. RICS England and Wales House Price Balance and Land Registry House Prices RICS House Price Expectations and House Price Balance RICS House Price balance adv. 6 months (LHS) Land Registry Index England and Wales (RHS) RICS Price Expectations RICS House Price Balance RICS 17 May 17

3 National Residential Market continued The Sales to Stock ratio, which also typically has a 6 month lead over official house price inflation, is again pointing to a steady trend during the second half of the year. Although demand has flattened, it continues to outstrip supply, with the RICS indicator on New Buyer Enquiries remaining above that for New Instructions in the latest results. 7 Ratio RICS Sales to Stock Ratio and Land Registry House Prices 3 RICS : Demand - Supply RICS Sales to Stock Ratio adv. Land Registry House Price Index (RHS) RICS New Buyer Enquiries (LHS) RICS New Instructions (RHS) The average inventory of unsold stock on agents books remains close to historic lows. Given the recent moderation in the RICS Newly Agreed Sales net balance, it is improbable that (HMRC) transaction volumes will increase much beyond, per month in the second half of the year. Average properties per branch RICS Average Stocks Per Surveyor RICS Agreed Sales Net Balance and HMRC House Sales RICS Agreed Sales net balance adv. 6 months (LHS) House Sales HMRC (RHS) RICS 17 May 17

4 Regional Residential Market The RICS House Price balance for London has been in negative territory over the past twelve months and suggests that the Land Registry inner London house price index would be flat at best in the second half of the year. Net balance % RICS Central London House Price Balance and Inner London House Prices The RICS South East price balance is a better guide to the Land Registry Outer London house price index and is continuing to point to a stronger picture than in the centre. Net balance % RICS South East Price Balance and Outer London Prices RICS SE Price balance adv. Land Registry Outer London Prices (RHS) RICS London House Price balance adv. Land Registry Inner London House Price Index (RHS) London transactions have fallen since the beginning of 16, although the RICS Newly Agreed Sales net balance suggests that the picture is beginning to stabilise. In East Anglia, the rate of growth in prices is expected to slow further over the next 6 months after a period of strong gains. Net balance % (3 month average) RICS London House Sales Expectation and London Sales Annual% change (3 month average) 1 RICS East Anglia House Price Balance and House Prices RICS London Sales Expectations adv. Land Registry London Transactions (RHS) - - RICS EA Net Price balance adv. Land Reg EA House Price Index (RHS) RICS 17 May 17

5 Regional Residential Market In contrast to the south, prices in the North West continue to rise with the pace of growth accelerating. The headline RICS price balance suggests that this trend will persist in the next six months. 9 RICS North West Price Balance and North West Prices The picture in the North East has been flatter and the price balance suggests that prices will continue to increase at a modest pace. RICS North East Price Balance and North East Prices RICS North West Price balance adv. Land Registry North West House Prices (RHS) RICS North East Price balance adv. Land Registry North East House Prices (RHS) The headline price balance for the East Midlands suggests that price growth in this part of the country will remain firm. The price balance reading for the South West is also consistent with a solid trend in price inflation over the second half of the year. RICS East Midlands Price Balance and East Midlands Prices RICS South West Price Balance and South West Prices RICS East Midlands Price balance adv. Land Registry East Midlands House Prices (RHS) RICS South West Price balance adv. Land Registry South West House Prices (RHS) RICS 17 May 17

6 Lettings Market Although Tenant Demand has lost momentum in recent quarters, it continues to outstrip Landlord Instructions. 7 3 Net Balance % Lettings: Demand - Supply The imbalance between demand and supply in the lettings market is leading respondents to believe rents will continue to rise at the national level, albeit at a slower pace. 3 Net balance % England Rent Expectations and Rents Annual% change RICS Tenant Demand RICS Landlord Instructions RICS England Rent Expectations adv. 4 quarters (LHS) ONS England Rental Index (RHS) In the London rental market however, demand has been weakening and negative feedback from respondents across the capital points to a subdued outlook for rents over the coming four quarters. Looking further out (the next five years), private rents are projected to rise at a faster pace than house prices. London Rent Expectations and Rents RICS Next Year Expectations Net balance % Annual% change 6 7. Annual average% change RICS London Rent Expectations adv. 4 quarters (LHS) ONS London Rental Index (RHS) Rent Expectations (next years) Price Expectations ( next years ) RICS 17 May 17

7 RICS UK Property Market Chart Book Market Surveys & Reports Get Involved Our market sentiment surveys provide a picture of how local property industry is fairing. The results of the surveys are relied upon and used by the Bank of England, the financial sector and the media as a leading indicator of the vibrancy of the industry. Taking part in completing the survey is quick and simple, can provide you with informal CPD hours and will allow you to raise your profile in the local media. rics.org/marketsurveys Download our latest market surveys and reports at www. UK Residential Market Survey (monthly) UK Construction Market Survey (quarterly) UK Commercial Market Survey (quarterly) UK Rural Market Survey (semi-annual) Economics Team Simon Rubinsohn, Chief Economist srubinsohn@rics.org, +44 () Jeffrey Matsu, Senior Economist jmatsu@rics.org, +44 () Sean Ellison, Senior Economist sellison@rics.org, +6() Kisa Zehra, Economist kzehra@rics.org, +44 () Tarrant Parsons, Economist tparsons@rics.org, + 44 () Janet Guilfoyle, Surveys Administrator jguilfoyle@rics.org, +44 () The RICS poll - considered one of the most reliable guides to movements in house prices. Financial Times The RICS survey - the best short-term lead indicator of house prices and activity in our view. Goldman Sachs The RICS Survey has been a good leading indicator for the direction of and inflection points in the IPD index,and therefore the UK commercial property market overall. Morgan Stanley The RICS Commercial Property Survey is an excellent predictor of future IPD total returns. North Row Capital 7 RICS 17 May 17

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