Solid Demand and Less New Listings Drives House Prices Up

RICS house prices

RICS UK Residential Market Survey, May 2021

  • New listings dwindle for the second month;
  • New buyer enquiries and agreed sales continue to rise ahead of stamp duty deadline;
  • House prices rises gather pace, nationally, for the fourth successive report.

HOUSE PRICES CONTINUE to rise as new listings fail to keep up with the number of interested buyers, according to the RICS UK Residential Market Survey, May 2021.

In May, the number of people looking to buy a new home continued to rise, with 32% more respondents noting an increase from prospective buyers. However, supply cannot keep up with this increase in demand, as a net balance of -21% respondents reported another fall in the number of new listings being brought to market.

This widening disparity between new buyer enquires and new instructions sees the gap at its widest since November 2013. The RICS data suggests however, that sales instructions could improve over the coming months, as survey participants are reporting that the number of market appraisals being undertaken is up on a 12-month comparison (net balance +24%).

Stamp Duty Impact

As the market sees the impact of people trying to beat the stamp duty holiday coming to an end, newly agreed sales rose once again. This month, +30% of respondents reported an increase, but this is down from +47% in April. Looking further ahead, whilst respondents expect sales to continue to rise in the coming three months, they do so at a lesser rate than reported in previous surveys. In May, +10% of surveyors expect sales to increase over the summer period, down from +21% last month.

The ‘sales boom’ is not anticipated to last, as sales expectations for the coming 12 months have now turned flat, suggesting that the Stamp Duty holiday is the primary driving force behind the latest market trend.

House Prices Rise

Current market conditions suggest that there is no sign of house price inflation losing any steam. The national house price net balance rose to +83% in May, up from +76% in April and is the fourth successive month in which upward pressure on house prices has intensified. All parts of the UK show that house prices have risen.

RICS Price expectationsIn addition, +45% of respondents envisage house prices to rise in the coming 3 months. Respondents also anticipate that prices will rise for the year ahead, as 64% more respondents anticipate an increase.

Rental Market

A similar pattern exists in the rental market, as tenant demand continues to outstrip supply leading to expectations for rents to rise further in the coming three months. In May, a net balance of +48% of surveyors reported a rise in demand for rental properties. However, for the tenth successive month, the net balance for the number of new rental properties being listed fell, with -21% reporting a fall. This disparity has led to +55% of respondents predicting rents to rise in the coming three months. Looking further ahead, contributors expect rents to rise by around 3%.

Simon Rubinsohn, RICS Chief Economist, said:

“Ending a tax break always has the potential to be a little disruptive for a market but with the economy performing better than could have been expected even a short while ago and the cost of money still at rock bottom levels, the principal drivers supporting demand will remain in place even after the expiry of the stamp duty holiday. More challenging is the question of supply, a theme coming back strongly from respondents to the survey both with regard to the sales and lettings markets.

“The government’s planning reforms including the relaxation of permitted developments rights is clearly designed to address this problem. But the jump in five-year expectations for prices and rents, to their highest levels since the middle of the last decade, suggests that there is a degree of scepticism about whether this approach will deliver a significant enough uplift in housebuilding numbers.”

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