In October, prices in London continue on their negative path as buyers wait for Brexit certainty, according to the latest RICS UK Residential Market Survey. Looking at the UK as a whole, prices are now falling nationally but the regional picture remains varied.
In the October survey, 47% more respondents saw a fall in prices in the capital. As prices fall nationally, with the weakest reading since September 2012, the drop mostly stems from London and the South East, with the price balance in the South East deteriorating during October. East Anglia, the South West and the North East also saw negative price balances, but prices continue to rise in other parts of the UK, with the strongest growth in Northern Ireland and Scotland.
Three month price expectations are also negative in London with 41% more respondents predicting a further decline. This trend continues when looking at the outlook for prices in the capital for the year ahead, which are also negative.
The weaker trend in prices is being driven by the lack of demand from new buyers, which is in part a result of heightened political uncertainty, ongoing affordability pressures, a modest upward move in interest rates and a lack of fresh stock coming onto the market. In October, 12% more respondents reported a fall in buyer interest in London, which is the second report in a row in which demand has deteriorated.
Feedback continues to point to higher priced housing, properties marketed at over £1m, seeing sales prices coming in below asking. As close to three quarters of respondents reported this trend. 14% also cited that sales prices were on average more than 10% below the initial asking price (up from 10% three months ago). For those looking for their first properties, the market is relatively steady price wise. Reporting on properties listed at up to £500k and below, a slim majority of survey participants reported that sales prices have been at least level with asking. Nevertheless, a still noteworthy 34% stated sales prices were coming in up to 5% below.
In terms of new instructions, and the supply pipeline, 9% more respondents saw a fall rather than rise in London over the month. Given these conditions, it is little surprise that sales remain subdued (agreed sales -14 net balance in London), with sales expectations also negative. 29% more respondents predicting a fall rather than rise in sales the near term in London.
In the lettings market, the quarterly (seasonally adjusted) data points to an improvement in tenant demand during the three months to October. Alongside this however, landlord instructions continued to fall, remaining negative and on the back of this, rents are expected to rise.
Simon Rubinsohn, RICS Chief Economist, commented:
“The London numbers remain disappointing with current activity subdued and the forward-looking indicators providing little prospect of an improvement anytime soon. Ongoing uncertainty about what a Brexit deal, or a no-deal outcome, might mean for the capital’s economy is clearly weighing on sentiment at the present time. But it is not the only issue holding back potential purchasers. At the higher end, SDLT remains a key impediment while elsewhere, affordability/ deposit requirements present a greater challenge. Unfortunately, I struggle to see where relief for either of these obstacles likely to come from.
“Meanwhile, the announcement of the extension of Help to Buy, albeit in a narrower format, should continue to underpin the new build market in the near term. Whether it, alongside other measures recently announced including the lifting of the HRA cap, is sufficient to drive housing starts up to the government’s 300,000 target over the coming years remains to be seen.”