Uncertainty continues to stifle the housing market

House price inflation dropped further in June, according to the latest RICS UK Residential Market Survey. At the same time there's little encouragement for sales activity with agreed sales declining alongside new buyer enquiries and new instructions.

Survey in brief

• Price growth loses momentum across the south of the country.
• Activity indicators point to flat sales trend continuing over the coming months.
• Average stock on surveyors books hits a new low highlighting ongoing supply shortag.

Political impact

The RICS Residential Market Survey for June included additional questions to gather further insight regarding the generally flat trend in activity being seen. At a national level, 44 per cent of contributors identified domestic political uncertainty as the biggest factor explaining the current state of the market.

This compares to 27 per cent who highlighted Brexit as the most important factor influencing the picture. Significantly, most parts of the UK apart from the capital showed a fairly similar pattern to the headline numbers. However, in London Brexit and the changes in Stamp Duty were both equally citied as contributing to the lethargy. 

Looking at price inflation, in June, 7 per cent of surveyors across the UK saw a rise rather than fall in prices at the headline level. This has slipped from a net balance of +17 per cent in May and is the lowest reading since July 2016. However, this trend is not wholly reflected across the country.

Regional changes

In Central London the pace of decline in house price inflation continues, with 45 per cent more respondents seeing a decline in prices over the month, while the South East and East Anglia are showing a flatter trend.

By way of contrast, in Northern Ireland 41 per cent more surveyors saw a rise in prices rather than a fall in June and in Wales 38 per cent more respondents saw a rise rather than fall in prices over the month.

The West Midlands and the North West are also regions where prices continue to rise and reported net balances of +33 per cent and +28 per cent respectively.

Subdued activity

Moving to overall activity and transaction levels, respondents once again saw a decline in newly agreed sales in June, with 5 per cent more respondents seeing a fall in sales over the month. This decline is the fourth consecutive negative reading and reflects both the lack of stock coming on to the market and a more cautious stance from buyers over recent months. 

Newly agreed sales are predicted to remain broadly stable over the next three months but the twelve month sales expectations indicator reading, while still pointing to an increase in activity, has slipped to its lowest level since the immediate aftermath of the referendum [net balance of +12 per cent]. 

Significantly for future activity, new instructions fell again and for the sixteenth month in a row, with 19 per cent more respondents seeing a fall rather than rise in property coming on to the market.  Against this backdrop, average stock levels have slipped to a new low.