The residential property market in the UK is beginning to pick up nationwide for the first time since February with prices and buyer demand both up, the latest index report shows.
The data from the Royal Institution of Chartered Surveyors (RICS) also says that market confidence continues to improve following some jitters just after the European Union referendum but Brexit is not having a major impact.
Some 8% more chartered surveyors reported an increase in buyer enquiries in September, a significant turnaround in new buyer enquiries compared to June when a net balance of 34% of respondents reported a drop.
But the report warns that the latest results show considerable variation across the UK, with some respondents seeing a more stable trend as opposed to a solid recovery.
But there is still a lack of properties coming onto the market. The number of new instructions being received by agents fell once again and as a result, the average level of stock on estate agents books remains close to historic lows at just over 45 properties.
RICS points out that this drop in new properties coming to the market continues a pattern that extends back to the middle of 2014 with a brief exception around the turn of the year when some vendors saw opportunity linked to the April hike in stamp duty for investors.
The drop in housing supply alongside the increase in buyer demand is expected to push up prices somewhat in the near term and by rather more in longer term. The net balance shows prices crept up in September, with 17% more chartered surveyors reporting an increase in prices than a fall, up fromb13% in August.
Over the next three months, nationally, house prices are predicted to rise further with 14% more respondents expecting to see an increase. This is the strongest reading since March and compares with 9% in August.
However, there remains a greater level of caution in central London where prices are expected to fall, albeit only modestly, over the same period. Anecdotal evidence suggests that uncertainty following the EU vote along with stamp duty changes, are both continuing to adversely impact the top end of the market in particular.
The lack of choice for would-be purchasers also appears to be restricting overall sales activity for the time being. Nationally, agreed sales were unchanged for a second month having declined sharply from May through to July.
Looking ahead, respondents’ optimism towards the sales outlook improved, with growth expected across most parts of the UK over the next three months. Further out, over the next 12 months, contributors are projecting sales to pick-up firmly in all areas.
On a UK wide basis, a majority of 59% of respondents feel house prices are around fair value at present, although 37% do feel their local market is overpriced to some extent. The regional breakdown shows over 60% of contributors in both the South East and London sense house prices to be above fair value currently.
Within this, over 20% of London respondents feel prices are ‘very expensive’ relative to fundamentals. Nevertheless, this proportion has remained broadly stable over the past six months. Northern Ireland (89%), along with Scotland (83%), currently exhibit the highest share of contributors who deem residential property in their local market to offer good value.
In the lettings sector, tenant demand increased firmly during September with the strongest rate of growth in 12 months. Landlord instructions were more or less unchanged at the headline level, but did increase notably in London and Wales. London remains the only area in which rents are expected to come under pressure in the near term, while virtually all other areas are anticipated to chalk up solid gains.
‘The market does now appear to be settling down following the significant headwinds encountered through the spring and summer, said Simon Rubinsohn, RICS chief economist.
‘Buyers do appear to be returning, albeit relatively slowly, but the big issue that continues to be highlighted by respondents is the lack of fresh stock on the market. Although this is not a new story, it is a significant one having ramifications for both prices and the level of turnover,’ he explained.
‘Central London remains something of an outlier with contributors telling us this is the one part of the market where there may be further give on prices in the near term. Elsewhere the price trend still seems on the up,’ he added.