RICS Residential Market Survey – December 2019

January 22, 2020

The RICS residential market survey has been published for December 2019.

The headline points are:

  • Sales expectations improve noticeably both in the near term and twelve months ahead
  • Enquiries rise while sales and instructions also increase (albeit more modestly) over the month
  • House price inflation anticipated to accelerate going forward

The December 2019 RICS Residential Market Survey results point to an uplift in sentiment following the result of the General Election. Sales expectations have risen sharply and a number of key activity metrics have moved into positive territory for the first time in several months. That said, this is also expected to lead to a pick-up in house price inflation both in the coming months and across the year ahead as a whole.

In terms of buyer demand, the headline new buyer enquiries indicator posted a balance of +17%, up from -5% in November. The majority of UK regions saw an increase in enquiries over the month, with respondents in Wales and the North East in particular reporting solid growth. At the same time, enquiries also rose in London and the South East, marking a noticeable turnaround following negative readings in the previous month.

Alongside this, agreed sales edged up at the national level, with the headline indicator registering a net balance of +9%. This is up from a reading of -6% in November and represent the first occasion since May 2019 in which the series returned a positive reading. London and East Anglia delivered amongst the strongest improvements in sentiment, chalking up net balances of +22% and +23% respectively. At the other end of the scale, sales reportedly weakened in Northern Ireland and Scotland during the month.

Looking ahead, near term sales expectations strengthened smartly for a third successive report. Indeed, a net balance of +31% of respondents now anticipate transactions will rise over the coming three months, with virtually all UK regions/countries displaying a positive assessment on the outlook. Furthermore, confidence in residential sales prospects over the next twelve months saw an even greater improvement, evidenced by a net balance of +66% of survey participants envisaging sales to rise in the year ahead (up from +35% previously). The strongest net balances were returned in Wales and the South West, although all regions now exhibit relatively robust readings.

In keeping with the brighter trends in demand and sales activity, new instructions being listed on the market also picked-up slightly at the national level, as a net balance of +9% of contributors reported an increase. That said, outside of London and the South East, new sales instructions were more or less flat, rather than picking up to any great degree.

With regards to house prices, the survey’s headline net balance came in at -2% (compared to -11% previously), signalling a broadly flat national trend for the time being. The South East, London and East Anglia all continue to see house prices soften for now, albeit only modestly, according to respondents. Meanwhile, at the other end of the spectrum, prices in Northern Ireland and Scotland are reportedly still rising at a firm pace.

Going forward however, near term price expectations were revised higher in all parts of the UK and now point to a noticeable shift in pressures across previously weakening areas such as London and the South East. Back at the national level, a net balance of +61% of survey participants see prices increasing at the twelve month horizon (a rise from +33% last time). What’s more, the outlook for house price inflation was adjusted higher right across the UK.

In the lettings market, tenant demand (non-seasonally adjusted monthly series) picked-up modestly over the survey period. Meanwhile, landlord instructions remained very much in decline, with this indicator stuck in negative territory going all the way back to 2016.

Going forward, rents are expected to increase as a consequence of the imbalance between rising demand and falling supply. Indeed, projections point to around 2% rental growth over the coming year, while this is anticipated to accelerate to average closer to 3% per annum over the next five years. It is worth noting that five year price expectations, at 3.5% per annum, have moved slightly above those for rents for the first time since 2018 (although we would caution against placing too much emphasis on a single month’s figures).