Economics

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RICS UK Housing Market Chart BookMay 2017

rics.org/economicsRICS UK Housing Market Chart Book

2 © RICS 2017 May 2017

Since the beginning of 2017, the headline reading for the RICS House Price series has been largely unchanged with a positive net balance of between 22 and 24. This indicator typically provides a lead over the official measure of house price inflation of around six months and would be consistent with the latter remaining around the 5% area through the second half of this year. That said, the RICS House Price Expectations series (for the next three months) has eased in recent months with the net balance reading now in low single digits; this would seem to imply that the risks are skewed towards the rate of house price inflation slowing further.

Demand has stagnated recently, as measured by the RICS series on New Buyer Enquiries, though is it still exceeding the flow of supply (in net balance terms) as captured by the indicator on New Instructions. Critically, average stock levels on estate agent’s books are close to a record low, which is continuing to weigh on the level of activity. This is reflected in the Newly Agreed Sales net balance which has turned slightly negative since the beginning of the year. Alongside this, the near term Sales Expectations series remains only modestly in positive territory.

Regionally, the London House Price balance (which tends to have a stronger relationship with the price of property in central London) has been negative since early 2016, with activity at higher price points in particular being hampered by changes in Stamp Duty. In contrast, the price balance readings in other parts of country generally remains more upbeat. Prices in the North West have consistently displayed amongst the strongest momentum since the middle of last year according to the RICS data.

The rental market is showing a broadly similar trend to the sales market in the sense that Tenant Demand continues to outstrip supply as measured by Landlord Instructions. As a result, rents are expected to increase in all parts of the UK (apart from the capital) with respondents believing that rents will grow at a faster pace than house prices in the medium term.

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RICS England and Wales House Price Balance and Land Registry House Prices

RICS House Price balance adv. 6months (LHS)

Land Registry Index England andWales (RHS)

In the first 4 months of 2017, the RICS House Price balance has remained within a tight range ( +22% and +24% ), suggesting annual price growth in England and Wales is likely to remain close to current levels through the rest of the year.

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RICS House Price Expectations and House Price Balance

RICS Price Expectations

RICS House Price Balance

Whilst the RICS House Price balance has remained steady in the first 4 months of 2017, the price expectations net balance has fallen back into low single digits, which suggests that house price inflation might surprise on the downside.

National Residential Market

rics.org/economicsRICS UK Housing Market Chart Book

3 © RICS 2017 May 2017

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2005 2007 2009 2011 2013 2015 2017

RICS : Demand - Supply

RICS New Buyer Enquiries(LHS)RICS New Instructions(RHS)

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

RICS Average Stocks Per Surveyor

Average properties per branch

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

RICS Agreed Sales Net Balance and HMRC House Sales

RICS Agreed Sales net balance adv. 6months (LHS)House Sales HMRC (RHS)

National Residential Market continuedAlthough demand has flattened, it continues to outstrip supply, with the RICS indicator on New Buyer Enquiries remaining above that for New Instructions in the latest results.

Given the recent moderation in the RICS Newly Agreed Sales net balance, it is improbable that (HMRC) transaction volumes will increase much beyond 100,000 per month in the second half of the year.

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RICS Sales to Stock Ratio and Land Registry House Prices

RICS Sales to Stock Ratio adv. 6 months (LHS)

Land Registry House Price Index (RHS)

Ratio

The Sales to Stock ratio, which also typically has a 6 month lead over official house price inflation, is again pointing to a steady trend during the second half of the year.

The average inventory of unsold stock on agents books remains close to historic lows.

rics.org/economicsRICS UK Housing Market Chart Book

4 © RICS 2017 May 2017

Regional Residential Market

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1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

RICS London House Sales Expectation and London Sales

RICS London Sales Expectations adv.6 months (LHS)

Land Registry London Transactions(RHS)

Net balance % (3 month average) Annual % change (3 month average)

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1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

RICS Central London House Price Balance and Inner London House Prices

RICS London House Pricebalance adv. 6 months (LHS)

Land Registry Inner LondonHouse Price Index (RHS)

Net balance %

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RICS South East Price Balance and Outer London Prices

RICS SE Price balance adv. 6 months (LHS)

Land Registry Outer London Prices (RHS)

Net balance %

The RICS House Price balance for London has been in negative territory over the past twelve months and suggests that the Land Registry inner London house price index would be flat at best in the second half of the year.

The RICS South East price balance is a better guide to the Land Registry Outer London house price index and is continuing to point to a stronger picture than in the centre.

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1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

RICS East Anglia House Price Balance and House Prices

RICS EA Net Price balance adv.6 months (LHS)Land Reg EA House Price Index(RHS)

In East Anglia, the rate of growth in prices is expected to slow further over the next 6 months after a period of strong gains.

London transactions have fallen since the beginning of 2016, although the RICS Newly Agreed Sales net balance suggests that the picture is beginning to stabilise.

rics.org/economicsRICS UK Housing Market Chart Book

5 © RICS 2017 May 2017

Regional Residential Market

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

RICS North West Price Balance and North West Prices

RICS North West Price balance adv.6 months (LHS)

Land Registry North West HousePrices (RHS)

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RICS North East Price Balance and North East Prices

RICS North East Price balance adv.6 months (LHS)

Land Registry North East HousePrices (RHS)

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

RICS South West Price Balance and South West Prices

RICS South West Price balance adv.6 months (LHS)

Land Registry South West HousePrices (RHS)

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

RICS East Midlands Price Balance and East Midlands Prices

RICS East Midlands Pricebalance adv. 6 months (LHS)

Land Registry East MidlandsHouse Prices (RHS)

The headline price balance for the East Midlands suggests that price growth in this part of the country will remain firm.

The price balance reading for the South West is also consistent with a solid trend in price inflation over the second half of the year.

The picture in the North East has been flatter and the price balance suggests that prices will continue to increase at a modest pace.

In contrast to the south, prices in the North West continue to rise with the pace of growth accelerating. The headline RICS price balance suggests that this trend will persist in the next six months.

rics.org/economicsRICS UK Housing Market Chart Book

6 © RICS 2017 May 2017

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1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Lettings: Demand - Supply

RICS Tenant Demand

RICS Landlord Instructions

Net Balance %

Although Tenant Demand has lost momentum in recent quarters, it continues to outstrip Landlord Instructions.

Lettings Market

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

England Rent Expectations and Rents

RICS England Rent Expectationsadv. 4 quarters (LHS)

ONS England Rental Index (RHS)

Net balance %Annual % change

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

London Rent Expectations and Rents

RICS London Rent Expectationsadv. 4 quarters (LHS)

ONS London Rental Index (RHS)

Net balance % Annual % change

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RICS Next 5 Year Expectations

Rent Expectations (next 5 years)

Price Expectations ( next 5 years )

Annual average% change

The imbalance between demand and supply in the lettings market is leading respondents to believe rents will continue to rise at the national level, albeit at a slower pace.

In the London rental market however, demand has been weakening and negative feedback from respondents across the capital points to a subdued outlook for rents over the coming four quarters.

Looking further out (the next five years), private rents are projected to rise at a faster pace than house prices.

© RICS 2017 May 2017

rics.org/economicsRICS UK Property Market Chart Book

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