Both buyers and sellers appeared to be fleeing the housing market in December, according to the latest housing market survey from the surveyors’ body RICS.
The intriguing question is whether this was a freak result cause by heavy falls of snow or are we seeing a climate change in the housing market.
Certainly the RICS points understandably to the bad weather as a factor in the results.
But we will have to wait for later results to provide a firmer answer to a question that may prove telling in how the balance between buyers and sellers shifts in a market that is looking increasingly unstable.
Feet of snow will almost inevitably have had some impact on how many people looked to sell or buy homes. And indeed within the regional data there is a hint of that the more rural parts of Britain such as East Anglia and Wales were hit particularly hard.
Meanwhile, the other related question is whether the bad weather influenced sellers more than buyers. For this we will definitely need to follow the pattern as it unfolds in future surveys.
Certainly, as we can see from the graph taken from the RICS December survey, interest from buyers has been waning for some months since it turned negative on the RICS scale in June. And this is reflected in the fall in prices recorded by RICS since July, which continued in December.
But it was not until October that we saw in the RICS survey a dramatic shift in interest from sellers. From strong growth, with a net balance on the RICS scale of +22% of surveyors reporting more homes coming on the market, the picture turned negative, with a balance of 4% of surveyors reporting fewer homes coming up for sale.
In December the measure became distinctly more negative at -14%.
The interest in these measures is clear, because the balance between sellers and buyers has a significant impact on the direction of house prices – representing, if you like, a measure of supply and demand.
However, a coordinated fall in both sellers and buyers also has implications for the market, particularly for house builders – and indeed estate agents and the Government.
Fewer interested buyers and sellers tend to lead to fewer property transactions. This means less money for estate agents and less money coming into the Treasury from Stamp Duty.
But a lower rate of residential transactions in the broader housing market is linked – it would appear from historic data (see second graph in this blog) – to fewer new homes sold. And this inevitably means fewer new private homes built.
In December the RICS survey suggested transactions were holding up. This is another measure well worth keeping a close eye on if you are trying to understand which way the wind is blowing in the housing market.