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UK house price growth slows

Words: Laura Edgar

House price growth has continued to slow in the UK, according to the latest figures in the Royal Institute of Chartered Surveyors (RICS) residential market survey.

RICS said its July 2016 figures represent the lowest survey reading in three years. Key indicators covering price expectations, buyer enquiries, agreed sales and new instructions all remained negative. Just five per cent of respondents across the UK saw a rise rather than a fall in prices while the London price indicator remains downbeat, with a net balance of 33 per cent, which RICS said, is “broadly consistent with an outright drop in prices in the capital.

Of the respondents to the survey, 12 per cent more than in June are predicting a decline in house prices over the next three months. Additionally, interest from prospective new buyers in the UK has declined, with the results suggesting there has been a fourth consecutive month of falling demand at a net balance of -27.

Compared with a survey from June 2016, 33 per cent more respondents reported a fall in new instructions while 34 per cent more respondents reported a fall in transactions.

RICS notes that a large proportion of respondents said that after an “initial wobble”, activity has returned to normal, while others think Brexit has had a “very modest or negligible impact”.

But the institute said its key indicators are up in July from June and show both sales and price expectations at the 12-month time horizon returning to positive territory, although modestly so.

“The housing market is currently balancing a raft of somewhat mixed economic news alongside the latest policy measures announced by the Bank of England, which have already begun to lower cost of mortgage finance. Against this backdrop, it is not altogether surprising that near-term activity measures remain relatively flat. However, the rebound in the key 12-month indicators in the July survey suggest that confidence remains more resilient than might have been anticipated,” said chief economist Simon Rubinsohn.

“Critically, it is hard to escape the stark message regarding supply that is evident in the latest set of results with RICS data showing inventories on agents’ books around historic lows on average. This is a long-running story that may have been exacerbated by recent events but clearly needs urgent action from the new government.”

Randeesh Sandhu, CEO, Urban Exposure, a residential development finance provider, said the result of the RICS survey backs up other recent evidence that the UK housing market is bearing some of the brunt of the Brexit vote in the immediate term.

“But looking further down the line, the survey also suggests agents have confidence that conditions will improve in the medium term, with 12-month price and sales projections edging back into positive territory.”

Sandhu said market weakness “may persist alongside continued uncertainty during the autumn selling season as the first major indicators of the impact of the EU referendum vote emerge”.

Having said that, he retains a positive overall view on UK housing.

“The survey results show inventory on agents’ books around historic lows on average further exacerbating the long-term issues around supply and demand. This will require urgent government action to turn around, though will serve to underpin market fundamentals over the medium to longer term alongside the historically low interest rates since last week’s base rate cut and the availability of credit for those who are looking to buy.”

The survey can be found here.

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