London and the South East continue to display the weakest sentiment regarding prices, with Scotland and Northern Ireland the only parts of the UK to have seen sustained price growth on a consistent basis over the past two months.
The RICS Residential Market Survey has found looking ahead, at the national level, 15% more surveyors anticipate house prices will be higher in 23 months’ time.
In the lettings market, demand from tenants continued to rise for a third successive month while landlord instructions slipped further. On the back of this, contributors are pencilling in rental growth of approximately 2% over the coming 12 months.
Simon Rubinsohn, RICS chief economist, said: “Brexit remains a major drag on activity in the market with anecdotal evidence pointing to potential buyers being reluctant to commit in the face of the heightened sense of uncertainty.
“Whether any deal provides the shift in mood music envisaged by many respondents to the survey remains to be seen but as things stand, there is little encouragement to be drawn from key RICS lead indicators. We expect transactions to decline on this basis.
“Arguably more significant still are the signs that developers are continuing to adopt a more cautious stance with the trend in new residential starts now flatlining. Against this backdrop, there is little possibility of delivering the uplift in supply necessary to address the ongoing housing crisis.”
The housing market remained subdued again in March with a lack of momentum likely to continue for a while longer. In March, enquiries from new buyers saw the eighth negative reading in a row, with 27% of surveyors seeing a fall in buyer demand. Demand fell across all parts of the UK in March.
As buyer interest declines, surveyors reported a net balance fall of -24% in agreed sales. This is consistent with an expected drop in the HMRC measure of transactions – currently operating at around 100,000 per month – over the coming months, reflecting the RICS series role as a lead indicator.
Beyond, there is a little more optimism, with sales anticipated to rise over the course of the next year.
The ongoing decline in new instructions and new property coming on to the market continues, having become progressively weaker in each of the past four surveys, falling from the net balance of -20% in December, to -30% in March.
As a result, despite reduction in agreed sales, average stock levels on estate agents’ books remain at 42 properties per branch.
Looking at prices, 24% of surveyors saw a decline rather than rise in prices at a headline level in March.
This measure was -27% net balance in February and, although this does end a streak of eight consecutive months of declining responses, the measure, as a lead indicator, is still pointing to a modest fall in house prices at the national level over the next couple of quarters.
Caroline Robinson, commercial real estate business development manager of Search Acumen, added: “The commercial property sector faces significant upheaval in the coming years as occupier demand continues to decline across the board.
“The demand for retail spaces is shrinking as customers move online and big name high street brands fall victim to online shopping.
“Demand for office space is equally on the decline as companies embrace remote working in an effort to reduce overhead costs.
“At the same time, there is an increasing trend of commercial properties being converted to residential property and brownfield land being developed upon in an attempt to boost much-needed urban housing supply.
“As the socio-economic landscape shifts, we will need tighter planning regulations if we are to better manage and maximise the land and property available to us.
“There will likely be a rise in activity in the commercial sector once we leave Brexit behind us, but the longer-term disruption of the market cannot be ignored.
“Commercial real estate investors will need to innovate themselves if they are to make the most of evolutions in retail, office and residential spaces. Understanding the potential and limitations of developments will be key to maximising profits and moving with wider trends.”