Demand from buyers in the region drops during April- Prices expected to continue to rise due to ongoing lack of supply
Despite the warmer weather and lighter nights providing the ideal opportunity for house buyers to view potential homes, interest from buyers in the North East dropped last month as uncertainty continues to affect the market, according to the latest RICS (Royal Institution of Chartered Surveyors) Residential Market Survey.
Following the buy-to-let rush that preceded the 1st April tax rise deadline, and with continued uncertainty caused by the EU Referendum, interest from buyers in the North East dropped in April with only 20% of the region’s chartered surveyors reporting a rise in demand, compared with 35% the previous month.
However, agents in the North East are optimistic that the sales market will improve shortly, with 38% of respondents expecting to see sales rise over the coming three months, and 19% anticipating price increases throughout May-July, although at a more moderate pace.
The reason some agents are not anticipating sales to increase over the coming three months could be due to the ongoing problem of lack of supply. The majority of chartered surveyors in the North East reported a fall in new instructions (homes coming on to the market) in April, with agents having an average of 71 homes on their books. This is a healthy amount, considering chartered surveyors in other regions such as Yorkshire and Humber only had 56 homes on their books last month. But this time last year agents in the North East had 95 homes on their books, and this lack of stock is looking unlikely to ease in the short term.
A lack of available homes – of all tenures and price ranges – has led to 65% more chartered surveyors in the North East expecting prices to rise across the region over the coming 12 months. Prices are expected to rise across all areas of the UK over the coming year. London has lower growth expectations than the rest of the UK with prices likely to remain flat, but the outlook for prices remains positive in each part of the UK over the next five years with contributors envisaging growth of between 3% and 5.5% per annum.
Turning to the North East’s lettings market, surprisingly following the recent increase in demand from buy-to-let investors there has as yet been no noticeable increase in new landlord instructions (rental properties coming on to the market). Comments suggest that recent policy changes towards the sector are leading to landlords reconsidering their positions in the market.
But demand for rental homes in the region increased last month, with 31% of agents reporting a rise in tenant demand. Reflecting the lack stock of all tenures, rental growth is expected to accelerate to an average of 4.6% per annum (3 month average) over the course of the next five years.
Chair of the RICS North East Residential Group, Neil Foster of Foster Maddison Property Consultants said: “Activity has faltered but deals are being agreed consistently. The referendum is just another obstacle to market fluidity, which was beginning to gain traction. Stock is disappearing, particularly rental properties, which will consequently result in rents rising.”
RICS Chief Economist, Simon Rubinsohn, adds: Uncertainty is a word that features heavily in the feedback we received from members who responded to the survey. More ominous is the expectation that both prices and rents will head materially higher over the medium term, despite existing affordability concerns, and the supply pipeline continuing to fall short of household growth, notwithstanding the various levers the government is pulling to try and drive development.”