Activity expected to cool as Stamp Duty deadline passes

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RICS have just released their UK Residential Market Survey for March 2016.

Key Facts:

  • Buyer demand and sales growth both ease

  • Sales expectations weaken signficantly in the aftermath of buy-to-let rush

  • Tight market conditions ensure prices continue to rise firmly at the UK-wide level


Rise in Stamp Duty


The March 2016 RICS Residential Market Survey highlights
a noticeable softening in near term sales expectations. This
follows a rush of buyers looking to avoid the additional Stamp
Duty surcharge (on second home and buy-to-let purchasers)
introduced in April. Meanwhile, the recent improvement in new
instructions stalled during March as tight market conditions
persist.

On the activity front, agreed sales improved for the fourth
month in succession although at a much slower rate in
comparison to earlier in the year. Looking ahead, near term
sales expectations dipped marginally into negative territory
for the first time since 2008. Even so, survey evidence had
strongly suggested sales were being temporarily boosted or
brought forward by a flock of buy-to-let investors and second
home purchasers looking to complete transactions before
the introduction of the aforementioned Stamp Duty change.

New Sales Instructions - Flat


Following a run of three successive monthly increases, new
sales instructions were broadly flat during March. Furthermore,
notwithstanding the marginal uptick over the latest month,
average stock levels per surveyor remain nearly 20% down on
an annual comparison. Alongside this, new buyer enquiries
were broadly stable at the national level although this masks
considerable regional variation. Indeed, demand fell sharply
in London and was broadly flat in the South East, Yorkshire
and Scotland. Meanwhile, enquiries grew, to a greater or less
degree, across all other parts of the UK.

Lack of Supply


With the lack of supply still an overriding feature of the market,
prices continue to be driven higher despite the easing in
demand growth. In fact, national house prices have now risen
continuously for an entire three year period.

Prices falling in London


London, however, is a notable exception. Indeed, prices
are now reported to be falling in parts of the capital and
near term expectations point to this continuing over the next
three months. Uncertainty surrounding the mayoral election,
sterling’s recent weakness and the upcoming EU referendum
are all cited by local practitioners to be weighing on the central
London market. Nevertheless, looking further out, twelve
month price expectations remain positive for now.

Lettings Market


In the lettings market, tenant demand (non seasonally adjusted
monthly series) continued to rise at a solid rate with growth
coming across all parts of the UK. Despite landlord instructions
picking up for the second consecutive month, the increase
was not enough to keep pace with demand. As a result, rents
are expected to rise firmly over the next twelve months.
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