Ahead of last week’s general election, both buyers and sellers showed caution, causing housing market activity to flatline in November, according to the latest Residential Market Survey by the Royal Institution of Chartered Surveyors (RICS).
Uncertainty over the general election and the final outcome of Brexit were weighing heavily on the minds of buyers and sellers last month, causing a number of key indicators to suggest that activity was being stifled to a considerable extent.
Last week’s election result, which saw the Conservatives win their largest majority since the 1980s, immediately resulted in a rally in shares and the pound as results trickled in, suggesting that confidence has started to return in some shape or form.
Survey shows optimism amidst weak numbers
One of the main indicators the RICS survey tracked was newly agreed sales – this indicator registered a marginal decline in headline transactions. However, the pace of decline was seen to have moderated since October.
The survey’s headline price balance slipped further into negative territory, giving a negative reading of -12 per cent, after three consecutive months of stabilisation. RICS claimed this was consistent with a modest decline in house prices, which had taken place over the survey period.
Despite the apparent pre-election slowdown, RICS expected momentum to pick up in the next three months, with sales expectations improving in November.
Declining rental stock was one of the key observations made by the survey for November – RICS estimated that a net balance of -29 per cent of respondents had reported a fall in landlord instructions, compared to -21 per cent in October.
Tenant demand remained stable on a national level, while RICS expected rents to rise modestly in the next three-month period.
Post-election boost for Prime Minister
Expectations of a possible post-election pick-up in the housing market will be welcomed by the Prime Minister, off the back of his victory last week. This is especially because other surveys such as one by IHS Markit earlier this month suggested the construction sector was contracting.
Bolstered by having a majority of seats in Parliament, the Prime Minister will now be able to press on with his party’s manifesto proposals in the coming months, including the scrappage of Section 21. It remains to be seen whether the weakness in construction is simply related to the pre-election uncertainty, or whether it is part of a longer-term trend.
One of the Prime Minister’s other key pledges on the campaign trail revolved around being able to deliver as many as 300,000 new homes by mid-2020, but falling activity in the construction sector, at least for the time being, seems likely to make that pledge harder to achieve.
In the meantime, a recovery in activity, while supply continues to fall short of demand, is likely to help move prices and rents higher. RICS noted that respondents to its survey were pencilling in rental growth of at least two per cent by December 2020, and as much as three per cent by late 2024.
RICS also added that there is also some optimism among survey contributors that house prices will continue to rise by at least 2.5 per cent over the coming years.