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Latest UK Residential Property News From The Royal Institute of Chartered Surveyors

Latest UK Residential Property News From The Royal Institute of Chartered Surveyors

Interest from potential buyers in UK residential property dropped off slightly during June 2012, with 10% more surveyors reporting a fall in new enquiries, according to the latest RICS survey.

This was also compounded by an insignificant proportion of new build residential homes hitting the market as new instructions dropped for a second successive month.

Overall activity in the UK residential property market has struggled to see any noticeable improvement since the end of the stamp duty holiday in March.

According to the latest Royal Institute of Chartered Surveyors (RICS) report, residential property supply and demand failed to turn a corner in June with newly agreed sales slowing for three consecutive months.

12% more chartered surveyors who responded to the survey across the UK reported falls rather than rises in newly agreed sales, while the average number of completed sales per surveyor over the previous three months fell fractionally to 15.5.

Residential property prices across the UK continued to fall last month, with 22% more surveyors reporting price falls rather than raises, the weakest reading since October 2011.

Regionally, London was once again the only part of the UK to report rising prices, although the pace of increase has slowed significantly since the start of the year.

Expectations for future residential property prices showed little change as a net balance of 19% more surveyors expect prices to continue to fall. However, there is optimism surrounding property transaction levels, with 11% of respondents predicting property sales to increase rather than decline.

Simon Rubinsohn, RICS Chief Economist said: “The housing market didn’t manage to turn a corner last month and activity remained in the doldrums. Fewer vendors looked to test the market and levels of buyer interest seem to have fallen back since the expiry of the stamp duty deadline earlier in the year. Although there is some positivity that the amount of sales going through is going to see an increase, it is unlikely that we will see any real movement until purchasing a property is more affordable and accessible for the likes of first time buyers.”

According to the report, 13% of chartered surveyors reported rent rises rather than falls in the three months to April 2012. This growth was largely driven by increasing demand as a net balance of 15% more respondents reported rises in prospective tenants, with houses in greater demand than flats.

Rental values in the UK have now grown consistently since 2009 as the problem of unaffordable mortgage finance and large deposits required by lenders remain a barrier to home ownership, with many potential buyers forced to turn to the rental market.

Significantly, supply of property to the market continues to grow, albeit at a slower pace, with 7% more surveyors reporting increases rather than decreases in landlords looking to let their properties.

Unsurprisingly, with rental values steadily increasing, landlords’ gross yields also continued to grow during the early part of the year, although the pace of growth has begun to slow. This was the case in every part of the UK with the exception of London where tenant demand also saw a slight downturn.

Looking ahead, surveyors remain positive that the market will remain buoyant over the next three months, with 13% more predicting rents will rise rather than fall.

Across the UK, all areas expect rents to continue to increase with the exception of Scotland where expectations entered negative territory for the first time since October 2009.

Peter Bolton King, RICS Global Residential Director, says, “The rental market is still fairly buoyant and this looks likely to continue, given the challenges facing the sales market. Indeed, mortgage finance may become even harder to access particularly for first-time buyers if the euro crisis continues to deepen. This points to tenant demand continuing to outpace supply. As a result, rents will remain on an upward trajectory, adding to the pressure on many households whose incomes are already being squeezed.”

Residential property prices across the UK slumped in April, according to the latest Royal Institute of Chartered Surveyors (RICS) housing market survey.

Across the UK, 19% more chartered surveyors reported property valuation falls rather than rises in house prices.

Expectations for future residential property prices also reached their lowest point with a net balance of 17% more respondents predicting further drops.

Demand from potential buyers was relatively flat during April 2012 as 5% more surveyors reported increases rather than decreases in new buyer enquiries (from +10% in March).

Meanwhile new instructions were stable as 1% more respondents reported falls rather than rises in new residential properties coming up for sale. Whilst the trend may appear flat, the level of supply has not seen any significant drops since July 2011.

April’s property transaction levels entered negative territory for the first time since September 2011, as 6% more RICS surveyors across the UK reported decreases rather than increases in transaction levels.

London was the only part of the UK to observe a residential property prices rise, while the West Midlands and Wales saw the most significant declines.

Whilst the RICS predictions for future property prices saw a notable dip, expectations for transaction levels once again remained positive with a net balance of +15% more respondents expecting sales to rise over the coming three months.

Global Director for Residential Property at RICS, Peter Bolton King, says: “With the recent surge in activity brought on by March’s stamp duty holiday coming to an end, it is unsurprising to see that prices across much of the country are continuing to fall. Renewed concerns over the economy and talk of a double dip recession dominating the headlines in recent weeks may well have served to undermine consumer confidence. What’s more, the continuing lack of affordable mortgage finance is still hindering many first time buyers who cannot afford to get a foot on the property ladder.”

The Royal Institution of Chartered Surveyors (RICS), has reported that Private Rented Sector (PRS), property rental prices have continued to increase across the UK but at a much slower rate than has previously been observed over the last 2 years.

RICS says the rental property market may be beginning to level out, with an increasing number of prospective tenants unwilling to pay out for increasing private sector rents.

With PRS rental growth beginning to slow in many areas of the UK and a recent upturn in prospective property buyers, RICS says an increased number of landlords are looking to sell their rental properties when they reach the end of lengthy tenancy agreements rather than face expensive refurbishment costs.

RICS members that also handle residential property lettings have stated that they expect very slow growth in PRS rental values.

Michael Newey, RICS spokesperson, said: “With many potential first-time buyers having been forced into rented accommodation due to problems with obtaining affordable mortgage finance, rental prices have grown quickly across much of the UK in recent times. However, it seems that tenants may be becoming less willing to meet increasing rental values. While still growing, demand from potential tenants is also beginning to slow. With a recent upturn in buyers entering the sales market prior to the expiry of the Stamp Duty holiday in March, it seems that those who are in a position to get a foot on the property ladder may have chosen now to do so.”

Sales of homes may rise a little over the coming year but prices will struggle to follow suit, according to the RICS Housing Market Forecast published on 22nd December 2011.

Prices at a headline level will edge lower by around 3% across the UK. However, the low level of supply should continue into the coming year, stabilising prices and preventing significant declines.

Transaction levels are likely to see a slight resurgence next year and climb back to around 880,000, roughly the level of activity recorded in 2010. However, to put this in context, total sales in 2006 were almost double this amount at 1.67 million.

The weak economic picture anticipated for the next six months, along with the prospect of increased unemployment, means that demand to purchase property is unlikely to see any significant increase and will remain relatively flat. While the government’s recently announced mortgage indemnity scheme is designed to help up to 100,000 buyers on to the property ladder, this is likely to have limited impact as it is restricted purely to new-build properties.

Meanwhile, despite the prospect of growing unemployment, repossessions will see only a very marginal increase in 2012. The number of repossessions for this year is likely to be around 35,000 and, although next year’s figure may be slightly higher, the total number of properties taken into possession over the next 12 months should not exceed 40,000.

Elsewhere, the residential lettings market will continue to perform well in 2012. Demand for rental properties remained strong throughout 2011, as many first-time buyers were unable to access the sales market. This looks set to continue over the coming 12 months. However, the gap between demand and supply is shrinking, suggesting that the increase in rental values may begin to slow as the year wears on.

Simon Rubinsohn, RICS Chief Economist said: “The general economic climate is likely to be the biggest influence on the residential property market next year. Prices could edge a little lower as unemployment continues to rise. However, the lack of supply in the market is likely to prevent any significant house price declines.Transaction levels should see a slight increase, although mortgage lending is likely to remain subdued which will limit the scope for improvement. As a result of this, the lettings market will remain firm, which means that rents are likely to increase further, albeit at a slower pace than in 2011”.

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