The May 2019 RICS UK Residential Market Survey results show at a local level a slightly better and stable picture with more sales agreed than previously. New buyer enquiries are improving whilst negative trends such as price reductions showed some signs of diminishing. The sentiment over the past 12 months, when looking at sales and asking prices, signal a modest recovery in values. At national level new buyer enquiries remain unchanged whilst new sale instructions have declined yet again for the 11th consecutive month.
From a positive prospective, in the South East and around South West London new enquiry levels are increasing, conversely this is happening when fewer properties are coming to the market, the reduction in stock levels is leading to a competitive market particularly between second time purchasers in the £1m to £2m price range. It is this sector of the market that is showing a healthy increase in demand. The Help to Buy market is beginning to lose momentum as more new builds come on stream as RICS valuers recognise that premium rates being asked by developers is beginning to have a negative affect with warning signs that top up loans will have to be repaid within the life span of the mortgage and not met by increased property values in this sector.
Whether we will see an improvement in residential sales overall during the remaining course of this year is remote but will depend largely on there being a reduction in the Stamp Duty rates followed by the UK government announcing a decision on Brexit. Expect a more resilient market in 2020.
The Survey covers the last three months of the lettings market where tenant demand increased at a modest rate for the fifth month in a row, whilst landlord instructions have declined once more, this appears to be a persistent theme over the past three years, and had been led mainly due to impending tax reforms, creating an imbalance in the supply chain because the rate of return landlords previously enjoyed is diminishing.
Internal rates of return previously enjoyed by landlords has fallen leading to more landlords selling up rather than continue to hold and relet.
In concluding, on sales, lower stock levels will ultimately lead to higher asking prices with a potential change in stamp duty rates forecast will help unlock the supply chain ensuring purchasers and vendors alike who will have a greater choice, increased stock levels will restrain values, and this in turn will help induce the market. On the lettings front watch out for more reforms including the possible introduction of rent controls, and tenant protection schemes.
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