Decline in activity may have been ‘exacerbated’ by Theresa May’s snap election

Today’s general election is said to have had an adverse impact on the UK housing market, with activity leading up to the poll falling away last month, according to new data from the RICS.

Enquiries from new buyers, new instructions from those wanting to sell, and agreed sales in the housing market declined in May, according to the RICS’ latest UK Residential Market Survey. In addition, price growth also lomomentum and was predicted to slow further during the next three months.

The data seems to corroborate similar findings from the Halifax, which yesterday published its latest house price index, which found house price growth had eased.

The RICS said that while a fall in property coming on to the market was a recurring theme in the past two years, “anecdotal evidence from respondents to the survey in May suggested this month’s drop may have been exacerbated by the general election, with some buyers and sellers adopting a ‘wait and see’ approach”. 

In May 25% more respondents cited a decline in fresh listings, compared to those reporting a rise, producing the most negative reading since July 2016. Alongside this, new buyer enquiries fell at the national level, having remained stagnant over much of the past six months. As with new sellers, a large portion of contributors suspected the general election was having an adverse impact on demand.

At the same time, agreed sales continued to decline for a second month running as the national indicator saw 8% more respondents seeing a fall in agreed sales, compared to -9% previously.

Going forward, near term sales expectations implied little change in the coming three months, but beyond this, in the next 12 months, respondents appeared slightly more optimistic, with a net balance of 26% anticipating an increase in activity.

Although lack of supply continued to support prices, the headline price growth indicator moved from +22% to +17% in May, the softest reading since August 2016, and prices continued to slip in Central London. Looking ahead, near-term price expectations also slipped to -1% from +5% in April, the third straight report in which this indicator has softened. London continued to exhibit sentiment more negative in comparison to all other parts of the UK, although near term expectations in all regions had slipped.

However this trend was not expected to continue long term, with national 12-month expectations remaining solid at +54%. And for the next five years, respondents envisaged house price inflation averaging 3.5% per annum across the UK as a whole.

In the lettings market, tenant demand rose only marginally on a non-seasonally adjusted basis, while new landlord instructions were again broadly flat. Some 17% more respondents nationally expected rents to rise, rather than fall, in the coming three months. And in terms of 12-month expectations, contributors were pencilling in around 2% headline rental growth for the year ahead.

Simon Rubinsohn, the RICS’ chief economist, said the latest survey suggested that uncertainty related to the general election may have contributed to the seemingly disappointing level of transactions in the housing market throughout the spring.

But he went on: “Perhaps the most ominous signal emanating from the data released today is that contributors still expect house prices to increase at a faster pace than wages over the medium term despite the difficulty many first time buyers are clearly having in taking their first steps onto the property ladder.

“The increasingly tight second hand market remains a cause for concern with the RICS series tracking new instructions to agents recording its fifteenth successive negative reading. It is hard to see this as anything other a major obstacle to the efficient functioning of the housing market.”