The outlook for the UK housing market over the next three months is the worst its been for 20 years, according to a recent report from the Royal Institution of Chartered Surveyors.
Total sales are expected to be flat or negative over the next quarter, with uncertainty over Brexit one of the main factors. The market is also being negatively affected by a lack of supply and low affordability, an ongoing trend throughout 2018.
Statistics from the report show that a net balance of 28% of RICS members expect a fall in sales over the following three months, which is the worst reading since the series was established in 1999. A net balance of 19% of surveyors saw house prices fall in December rather than rise, higher than the balance of 11% shown in November. New buyer inquiries also declined for the fifth month in a row. The number of new properties entering the market also fell in December, continuing a six-month trend.
“We experienced a slowing down in the local property market from last summer onwards with a lot of it down to the Brexit unknowns,” said David Knights, an estate agent at Knights of David Brown & Co in Ipswich. “Uncertainty causes people to sit on their hands. When buyers don’t know what’s going to happen you can understand them being careful about how much they’re prepared to offer.”
Simon Rubinsohn, chief economist at RICS, said: “It is hardly a surprise with ongoing uncertainty about the path to Brexit dominating the news agenda, that even allowing for the normal patterns around the Christmas holidays, buyer interest in purchasing property in December was subdued. This is also very clearly reflected in a worsening trend in near-term sales expectations.”
According to data from the Office for National Statistics, in October last year the average house price in the UK was £230,630, a fall of 0.1% from the previous month.
Surveyors were a little more optimistic about the long-term prospects for the country’s housing market, suggesting that after Britain’s planned departure from the EU at the end of March the market should react positively and start growing again.
“Looking a little further out, there is some comfort provided by the suggestion that transactions nationally should stabilise as some of the fog lifts, but that moment feels a way off for many respondents to the survey,” said Rubinsohn.
David Knights said: “We’re not going to see an instant rebound once Brexit is out of the way, but I think we’ll see progression over the year. There are really no signs that we are going to have similar problems that we experienced in 2007 and 2008.”
The level of stock on estate agents’ books are almost at a record low, with a current average of only 42 properties per branch. Additionally, landlord instructions had declined in every month last year. Rubinsohn believes that once the supply increases, the difficulties seen in the market should start to subside.
“It is hard to see developers stepping up the supply pipeline in this environment,” said Rubinshohn. “Getting to the government’s 300,000 building target was never going to be easy but pushing up to anywhere near this figure will require significantly greater input from other delivery channels including local authorities taking advantage of their new-found freedom.”