Government support measures will help boost housing market

The UK housing market is showing initial signs of recovery as new buyers and sellers come in to the market, but respondents remain cautious about the year ahead, according to the June 2020 RICS UK Residential Market Survey.

As agents continue to return to work following lockdown closures, the number of people looking to purchase a home rebounded in June. The net balance of +61% of survey respondents seeing a rise in new buyer enquiries over the month, is in stark contrast to the readings of -7% and –94% posted in April and May respectively.

The number of new properties being listed for sale also rose over the month, with a net balance of +42% of survey participants noting an increase rather than decrease. Despite this increase in supply, the average number of properties on agents’ books remain close to all-time lows – just 39 on average per branch.

As agents continue to deal with a backlog of sales held up by lockdown, the number of newly agreed sales moved into positive territory for the first time since February, with a net balance of +43% citing an increase in completed transactions.

However, looking ahead the short-term outlook is only modestly positive and there is greater caution when looking to the year ahead. For the next three months, +16% of survey participants expect sales to rise, however, on the twelve-month horizon the measure slipped back into negative territory, pointing to a need for further support to instil confidence back into the market. Many comments left by the respondents cite that the challenging economic climate is likely to dampen market conditions for some time to come.

Moving to prices, for the third successive report respondents have reported a decline in house prices, however the latest figure is less downbeat than posted in May. (net balances of -15% June from -22% in May)

Going forward, house prices are expected to continue to fall but, as the market appears to bounce back a little, only a net balance of -12% of respondents expect prices to fall in the coming three months compared to -43% in May. Looking to the next twelve months, respondents now anticipate a flat to marginally negative trend in house price inflation.

Simon Rubinsohn, RICS Chief Economist commented: “Key activity indicators in the RICS survey suggest that the market is enjoying a short term bounce following ending of the lockdown, with sharp spikes in the metrics tracking both buyer enquiries and new instructions.

“However, there are worrying signs that this rebound may quickly run out of steam against the backdrop of a tightening in lending criteria by mortgage providers, and the uncertain macro environment particularly with regard to the employment picture. Respondents to the survey highlight both of these issues in explaining the broadly flat picture regarding sales expectation beyond the immediate uplift.

“Meanwhile, the issues around the sales market appear to be shifting sentiment in the lettings market with, somewhat ominously given the prevailing economic climate, rent expectations beginning to edge upwards once again.”

Tamara Hooper, RICS Policy Manager, added: “Government must ensure they keep the public at the heart of their interventions when rebuilding post Covid. An ask RICS has called for since March is the temporary removal of stamp duty for all home movers, not just first time buyers, and this specific change will demonstrate Government’s confidence in the residential sector as well as encouraging the economy and the country to start moving again.

“In keeping with this, all tenures must be addressed, and we look forward to more detail on the retrofitting announcements from Government with regards to the PRS.  Tenants needs are just as important as home owners, including their financial needs for decreased bills from more energy efficient housing if rents are set to rise. The need to feel safe, warm and secure is more important than ever.”