UK house sales on the rise say surveyors

The May 2013 RICS Residential Market Survey results highlight the significant improvement in sales

market sentiment that is underway, with both the current and forward looking indicators touching

multi-year highs. 

This improvement is largely attributable to the Bank of England’s Funding for

Lending Scheme, but the Government’s Help to Buy policy may also be beginning to play a role.

The activity picture has improved markedly, with the newly agreed sales balance increasing from 21

to 30 and the new buyer enquiries balance rising from 27 to 30. Both indicators have reached 2009

levels. 

The pick up in buyer interest over the last three months or so appears to be enticing more

homeowners to test the market, with the new vendor instructions balance reaching 15, up from 8.

In spite of the increase in new instructions, average stock levels (per branch) actually fell on the

month, which allied to a rise in average sales levels, pushed up the sales to stock ratio to 27.5%.

This gauge of market slack has increased by 5 percentage points over the last twelve months.

However, it is still some way below its long average of 32.5%, indicating that while market conditions

have tightened recently, at the national level they are still ‘looser’ than normal.

The better tone to the activity picture is also reflected in the survey’s forward looking measures. The

sales expectations balance at the 3 month horizon increased from 26 to 35, the highest reading since

May 2009, while the same measure at the 12 month horizon remain stable at 55.

Meanwhile the pricing picture is also brightening. The price balance increased from 1 to 5 and the 3

month price expectations balance increased from 12 to 20. The survey also measures expectations

in actual percentage terms and on this basis, respondents now expect house prices to increase by

1.4% over the next 12 months, compared to 1.1% last month and 0.1% in December.

There remains considerable regional variation, with prices over the next year expected to increase by

4.1% in London compared to 0.2% in Yorkshire and Humberside. 

Nevertheless, given that many parts of the UK are still experiencing house price falls in year on year terms, it is noteworthy that respondents across all of the survey’s regions are now expecting positive price growth over the next 12 months, including Northern Ireland at 0.6%.

On the lettings front, the data - which is not seasonally adjusted on a monthly basis due to its short

history - suggests growth in tenant demand remains firm and continues to outpace growth in landlord

instructions.

As a result, rents are expected to continue rising over the near term, with the rental expectations

balance little changed at 21. As with the sales market data, the survey also measures 12 month

expectations in actual percentage terms, and here respondents now expect rents to increase by

1.4%. This figure has barely changed over the last 6 months. Moreover, it is interesting that while

price increases are expected to be greatest in London, rental expectations in the capital are far more

aligned to the national average.