House price growth slows

UK house price growth slowed in July, according to the latest residential market study published by the Royal Institute of Chartered Surveyors.

Key indicators covering price expectations, buyer enquiries, agreed sales and new instructions all remained firmly negative, according to the survey.

The results show UK house price growth at its lowest reading in three years.

In addition, the London price indicator remains downbeat at -33%, consistent with an outright drop in prices in the capital.

Near term price expectations across the UK were also negative for the third month in succession.

As activity falters, interest from new buyers in the UK also continues to wane, with results showing a fourth consecutive month of falling demand.

Lack of stock in the housing market continues to cause ripples, with new instructions falling again in the month of July.And 33% more respondents to the survey have seen a fall in new instructions and supply is at or around record lows in most parts of the UK.

Across the UK, 34% more respondents also reported a fall in transactions, with the monthly pace of decline in both July and June at the fastest since 2008.

However, looking into the comments left by members suggests conditions vary markedly between agents. A large portion of respondents note, after an initial wobble, activity has returned to normal, while others feel Brexit has only had a very modest or negligible impact.

Significantly looking a little further out, key RICS indicators are up in July from June and show both sales and price expectations at the twelve month time horizon returning to positive territory, albeit relatively modestly so and well down on the numbers recorded through 2015 and the early part of this year.

Simon Rubinsohn, RICS chief economist, said: “The housing market is currently balancing a raft of somewhat mixed economic news alongside the latest policy measures announced by the Bank of England, which have already begun to lower cost of mortgage finance. Against this backdrop, it is not altogether surprising that near term activity measures remain relatively flat. However the rebound in the key twelve month indicators in the July survey suggest that confidence remains more resilient than might have been anticipated.

“Critically, it is hard to escape the stark message regarding supply that is evident in the latest set of results with RICS data showing inventories on agents books around historic lows on average. This is a long running story that may have been exacerbated by recent events but clearly needs urgent action from the new government.”

Jeremy Blackburn, RICS head of policy, addded: “The new Prime Minister has rightly cited housing in her list of priorities and pledged a major house building campaign. With the RICS residential survey again showing a lack of supply in the housing market across the UK, we need a coherent and coordinated strategy from government that builds on previous plans, and includes strategy for a functional Private Rented Sector (PRS) as an important part of the housing mix.

“Any new PRS policy should focus less on penalising small landlords and more on incentivising an institutionalised PRS, building at scale and managed to higher standards across our major cities. Developers and house builders have a huge part to play in increasing supply but we must pull on all the levers available to us, including councils, housing associations and community land trusts - we need all delivery mechanisms.”

Andrew McPhillips, chief economist at Yorkshire Building Society suggested Brexit had contributed to a drop in demand as prospective buyers wait to see how the UK's decision to leave the EU will affect the market: “Demand for properties has dropped significantly since Brexit, as prospective buyers wait to see how it affects markets and their own finances. If this slump becomes more pronounced, it could cause a short-term drop in prices which may see the market self-adjust as buyers look to make the most of the reductions.

“Such an increase in demand would ultimately push house prices back up again so the market may remain volatile in the coming months. But people’s desire to own a home remains strong and combined with the underlying lack of supply that should support house price growth in the long-term.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, said:“On the ground we are finding that a sense of realism has returned to the market and that genuine sellers and buyers are negotiating hard to make deals happen.

“Clearly there are some buyers who feel it is just too uncertain at the moment but most seem determined to go ahead. In any event, prices are being underpinned by a continued shortage of property although we have noticed first-time buyers are still quite active and investors from abroad are showing more interest in the market.”

RICS is the world's leading trade body for qualifications and standards in land, property, infrastructure and construction.