In its UK Residential Market Survey for June, the Royal Institute of Chartered Surveyors (RICS) reported an increase in new buyer interest for the first time since November 2016, with 10% of agents across the country reporting a rise in new enquiries. This timing would suggest that buyers, who have been waiting patiently in the runup to Brexit, have decided that life cannot be put on hold any longer and have decided to go ahead with a house move. There has been an accompanying, slowly growing, number of new properties going up for sale, and newly agreed sales have also increased in number (albeit only by a net balance of +2%). However, the market remains challenging, and there is currently no straightforward description that fits the UK residential property market as a whole – regionally, there are variations by postcode. Brexit aside, other economic indicators, such as low unemployment and historically low interest rates, are factoring in people’s decisions to either move up the property ladder or buy a first home.
Hot and cold
House prices in London fell by 4.4% in the year to May 2019, according to the Office for National Statistics, while the North West saw prices grow by 3.4% in the same period. PropCast, The Advisory’s tool for measuring property activity, reveals that markets are currently experiencing huge variation across all regions of the UK. Indeed, it identifies postcodes where properties are hard to sell sitting on the border of areas where homes are going under offer in less than 30 days. The N18 postcode is bucking the London trend, with the market heating up and properties selling quickly in contrast to more affluent London postcodes.
If the price is right
Not surprisingly, the level of variation in the number of houses going on the market across the country, and the speed at which they are selling, is making valuations more difficult. Estate agents surveyed by RICS called for more realistically priced properties, pointing out that some agents are overvaluing properties in order to receive the instructions. Sellers who choose to run with an overly optimistic valuation are finding their homes are not attracting increasingly savvy buyers.
New builds still in demand
The proportion of property sales accounted for by new builds is now more than 12%, with their price premium sitting in the 5 to 10% band, down from 17% two years ago (the price premium remains slightly higher in the capital, although this has narrowed due to challenging market conditions). The Help-to-Buy scheme, introduced following the financial crash of 2008, has helped to increase the supply of new build homes, with 38% of all new build sales supported by the scheme (equating to 4% of all house purchases).
Demand for rental properties remains strong, while at the same time there has been a drop in instructions from buy-to-let landlords, who have felt the impact of tax law changes. Rents are likely to increase and five-year projections point to rental values rising by 3.6% per annum (while house prices are projected to rise by 2.7%). While the Government is making buy-to-let more difficult, it is encouraging the expansion of the build-to-rent sector; these developments are starting to appear across the UK and should help ease the demand for rental properties going forward.
This slow but steady market has yet to return to pre-2016 levels of activity, and there are few signs of it picking up dramatically in the short term. However, as this period of economic uncertainty draws to a close, those who have sat tight will inevitably be looking to enter the market, indicating that over the next year and beyond, we can expect a further increase in both the number of buyers and the number of properties for sale.