Lack of housebuilding stagnating residential sales, RICS reports

A dearth of activity by Britain’s building industry is being cited as a key factor in a stagnating housing market, the Royal Institute of Chartered Surveyors (RICS) has claimed.

The increase in house prices is “coming to a standstill at the national level,” according to the latest RICS UK Residential Market Survey. “Alongside this, sales activity continues to lack momentum,” it added.

A net balance of just 1% of surveyors, polled by RICS across the UK, reported increasing prices in July, down from 7% in June in what is the “softest reading” in four years.

Low stock numbers, combined with political uncertainty and the impact of tax changes are all playing a part in holding back the housing market, according to the report.

While growth nationally is flat, there are some key trends emerging in different parts of the country. In areas such as Northern Ireland, the West Midlands and the South West, house prices are “on an upward trend.”

But these increases are being countered by falls in prices in London and the South East. “The price balance for the South East of England fell further into negative territory, posting the weakest reading for this part of the country since 2011,” said the report.

More than two-thirds (68%) of properties priced at a million pounds or more are selling for less than the asking price. The proportion fetching less than the asking price stands at 57% in the case of properties put up for sale at between £500,000 and £1 million, and 37% for homes priced at less than £500,000.

While the report predicted a “flat trend over the coming three months” it claimed: “Over the next twelve months, a net balance of +28% of respondents anticipate an increase in prices.”

But this is against a “subdued backdrop.” Buyer demand has “failed to see any meaningful growth going back to November 2016” and newly agreed sales “has now been negative for five straight months.”

The report stated: “A sustained deterioration in the flow of fresh listings coming onto the market continues to hamper activity, with new instructions dwindling for the seventeenth consecutive month during July. Consequently, average stock levels on estate agents’ books remain close to record lows.”

Simon Rubinsohn, RICS Chief Economist, commented: “Sales activity in the housing market has been slipping in the recent months and the most worrying aspect of the latest survey is the suggestion that this could continue for some time to come.  One reason for this is the recent series of tax changes but this is only part of the story. Lack of new build in the wake of the financial crisis is a more fundamental factor weighing on the market.”

He added: “The flatter trend in price growth is arguably a silver lining but there is no real indication that the housing market will become materially more affordable anytime soon. Hence the need for the government to press ahead with the Build to Rent initiative as well as continuing to focus on other tenures alongside home ownership to try address this critical issue.”

RICS economist Tarrant Parsons added: “RICS have always called for more new homes to be built. But across all tenures and not just for those looking to buy. The last ten years has seen a dramatic fall in housebuilding, which ultimately pushes up house prices, and the current levels of house building fall far short of the estimated requirement to keep up with population growth and fulfil any shortfall. However, more houses does not equal a fall in prices. House prices are not simply determined by supply and other factors are at play, with trends across the economy having a significant influence.”