House prices look set to falter as increasing uncertainty weighs on the market
· Demand from buyers falls at the fastest rate since November 2014
· Prices across the region see modest growth, whilst central London shows a price drop
· House prices set to dip over the coming months, while rents increase
Despite a buoyant rental market, the North East’s housing market continues to slow, according to the latest Royal Institution of Chartered Surveyors (RICS) Residential Market Survey.
Following on from last month, interest from new buyers in the North East property market dipped for the second consecutive month; with 12% more chartered surveyors reporting a decline in new buyer enquiries. With the upcoming EU Referendum and the changes from April Stamp Duty Levy Tax blamed for the drop in current activity.
Despite a decline in enquiries, prices continued to rise over the month of May with 11% more chartered surveyors reporting an increase and prices remaining steady over the summer months. In addition, for the first time since February 2013, a net balance of 5% of respondents predict sales to drop over the next three months.
The ongoing problem of lack of supply continued to hinder the region’s property market in May with 10% more respondents reporting a fall in new homes coming on to the market. With 33% more agents reporting a decline in newly agreed sales and currently having an average of 78 homes on their books the lack of stock is still looking unlikely to ease in the short term.
Chair of the RICS North East Residential Group, Neil Foster of Foster Maddison Property Consultants commented:
“Activity levels have been knocked by referendum propaganda. We are still managing to agree and maintain sales at a reasonable level but are continued to be hindered by a lack of new instructions.”
RICS Chief Economist, Simon Rubinsohn, said:
“It appears to me we are looking at a short-term dip in the market caused by the uncertainty resulting from the forthcoming EU Referendum coupled by a slow-down following the rush to get into the market ahead of the tax change on the purchase of investment properties. Certainly, that’s the story we are hearing from our members. There is not at this point a sense that a fundamental shift is taking place in the market.”
While the near term outlook for prices has softened significantly, a net balance of 54% of contributors, nationally, still expect prices to be higher twelve months from now than they are today.
In the regional lettings market tenant demand continued to rise across all areas with a net balance of 54% of North East contributors reporting an increase. For the third consecutive month, 17% of respondents reported a fall instead of a rise in new stock coming on to the market. This demand-supply imbalance – demand has now outpaced supply since November 2015 – is driving rental values higher and a net balance of 15% of chartered surveyors foresee further growth over the coming three months. Reflecting the lack of stock, rental growth is expected to accelerate to an average of 2.0% per annum (3 month average) over the course of the next five years.