Near-term sales expectations deteriorated in August, as Brexit uncertainty weighed heavily on sentiment, according to the latest Residential Market Survey by the Royal Institute of Surveyors (RICS).
Both buyers and sellers felt unsure about the direction of the market due to Brexit, with near-term sales expectations dropping from a net balance of -4 per cent to -23 per cent, which was the poorest response seen in a RICS Residential Market Survey since February this year.
A slight improvement was expected over the coming 12-month period, albeit only very modestly, RICS revealed.
Positivity fades from the market
RICS recorded flat demand from new buyers in August, claiming positivity was fading from the market, after having seen enquiries from potential buyers increase in previous months. New instructions to sell remained stable throughout the month, while price pressures remained muted.
The RICS house price indicator gave a reading of -4 per cent in August, which they believed suggested prices remained unchanged during the month. In the year ahead, respondents expected prices to be marginally higher.
Stable house prices were a trend also spotted in a House Price Index by Halifax
Strong lettings demand
Despite downbeat expectations for the months ahead, the lettings market showed signs of optimism, RICS revealed. In August, demand from tenants increased for the eighth month in a row, with a positive net balance of +23 per cent more respondents noticing a pick-up in demand from tenants for fresh lettings.
In comparison, landlord instructions continued to decline, according to the new survey, a trend RICS had been monitoring since 2016. As a result of rising demand from tenants, combined with a falling supply of properties for letting, RICS expected rents to rise higher.
Simon Rubinsohn, chief economist at RICS, commented: “It is hard to get away from the shadow being cast over the housing market by the seemingly never-ending Brexit saga. Indeed, uncertainty is a theme that respondents continue to highlight as a negative influence in survey after survey.
“That said, the key RICS activity indicators have actually remained relatively resilient until now, pointing to only a modest dip in transactions across the country, rather than anything more severe.”
Mr Rubinsohn concluded: “More ominously, the August RICS results again draw attention to the challenge in the lettings market, with feedback continuing to indicate that demand is outstripping supply. As a result, the pressure is for rents to continue moving higher and indeed outstripping any price gains, both in the near and medium-term.”
Hew Edgar, head of UK government relations and city at RICS, added further commentary: “The ever-changing policy landscape is damaging confidence in the lettings market. But the Private Rented Sector (PRS) has the enormous potential to deliver more homes that are urgently needed, and to contribute to the alleviation of the affordability issues which are being exacerbated by the ongoing dearth of supply across all tenures.”