Results of RICS UK Residential Market Survey – July 2017
Lack of new housing stock, the effect of LBTT (Land & Buildings Transaction Tax) on higher-value properties and a fall in the number of new instructions have left the Scottish property market stagnant in July, the latest RICS residential survey has found.
Across the UK, headline price growth gauge slipped from +7% to +1% in July, signalling prices were broadly flat over the period and representing the softest reading since early 2013.
Shortage of housing stock remains ‘overriding’ issue
Lack of momentum in both sales and enquiries
LBTT ‘continues to blight upper price sector’
Contributors to the July survey reported on sales prices in comparison to their asking price. Nationally, homes at the top end of the market (those listed at more than £1million) saw the greatest deviation in agreed prices, with 68% of respondents reporting sales prices coming in below the asking price. While this is not uncommon in a flatter market, 33% of respondents said the agreed price was up to 5% below the asking price and 26% reported between 5% and 10% under.
Looking ahead, near-term price expectations across the UK continue to signal a flat trend over the coming three months at the headline level. Over the next twelve months, respondents remain more optimistic with a net balance of +28% anticipating an increase in prices, albeit this was the least positive reading since last July and the EU referendum results.
Alongside this, sales activity continues to lack momentum, with the net balance readings for buyer enquiries and agreed sales remaining slightly negative, -4% and -5%, respectively. Respondents are not anticipating activity in the sales market to gain impetus at this point in time, with both three and 12-month expectations series virtually flat.
The main element holding back the UK market continues to be a sustained deterioration in the flow of fresh listings, with new instructions dwindling for the seventeenth consecutive month during July. Consequently, average stock levels on estate agents’ books remain close to record lows, limiting choice for potential home buyers.
In the UK lettings market, the quarterly figures*, also portray a more subdued picture. Although tenant demand continued to edge higher, it did so at the slowest quarterly pace going back nearly twenty years. Meanwhile landlord instructions continued to fall with 8% of respondents reporting a decline instead of an increase in listings. The sustained lack of supply means rents expected to grow, albiet only modestly in the coming three months. And looking a little further they are projected to increase by a little under 2% nationally over the next twelve-month point.
Hew Edgar RICS Policy Manager, Scotland, said: “This latest survey merely reinforces what we have been saying for some time – that the current LBTT bandings are creating a bottleneck in certain areas of the market, and encouraging property owners to eschew moving in favour of improving their current properties.
“The Scottish Government must address this problem by reviewing the LBTT framework and putting in place a structure that would inject some much-needed fluidity into the market.”
Simon Rubinsohn, RICS Chief Economist, added: “Sales activity in the housing market has been slipping in the recent months and the most worrying aspect of the latest survey is the suggestion that this could continue for some time to come. Lack of new build in the wake of the financial crisis is a fundamental factor weighing on the market. And there are some very real consequences for the UK economy from all of this, including the impact on the ability of people to be mobile when looking for work.
“The flatter trend in price growth is arguably a silver lining but there is no real indication that the housing market will become materially more affordable anytime soon.”