Member Article

Study predicts North East housing sales to slow

Enquiries from new buyers and new instructions from those wanting to sell in the North East’s housing market declined once again last month, according to the latest RICS UK Residential Market Survey.

As a result, sales are predicted to slow further over the coming year due to an ongoing shortage of stock.

Although a fall in property coming on to the market is a recurring theme over the past two years, anecdotal evidence from respondents to the survey in May suggests the further drop in stock levels last month may have been exacerbated by the General Election, as some adopt a ‘wait and see’ approach.

In May, only 2% of respondents reported a rise in new buyer enquiries, whilst 50% cited a decline in fresh listings. As with new seller’s, a large portion of contributors suspect the General Election is having an adverse impact on demand.

However, agreed sales increased last month – albeit modestly – with 13% more respondents reporting a rise in sales (up from 3% back in April). But going forward, near term sales expectations imply little change over the coming three months; and beyond this over the next twelve months, respondents appear pessimistic with only 8% anticipating a rise in sales activity for the year ahead.

But Simon Bainbridge MRICS of Savills in Darlington is confident the market is improving. He said: “We’re seeing a growing confidence in the North East market, at last, with more robust bidding and more urgency once a sale is agreed.”

Looking at prices, only 15% of respondents expect house prices to rise over the coming three months, whilst over the coming 12 months’ more contributors expect price momentum to pick-up again as the lack of supply continues to support prices, with 48% anticipating prices will increase over the next year. Further out, over the next five years, respondents envisage house price inflation averaging 3.5% per annum across the UK as a whole.

In the lettings market, 27% of contributors saw a rise in demand for rented homes last month (up from 10% back in April), whilst 63% reported a decline in new landlord instructions (rental homes coming onto the market).

Looking ahead, 27% of respondents expect rents to rise over the coming three months, due to increasingly healthy demand for rented homes.

Chair of the RICS North East Residential Group, Neil Foster MRICS of Foster Maddison Property Consultants in Newcastle said: “Rental stock is reducing and yet demand for homes to rent is rising.

“Affordability is already squeezed so it’s not long before the realisation dawns that political meddling is set to seriously unbalance the private rented equilibrium in the North East market.”

Simon Rubinsohn, RICS Chief Economist, added: “Although the latest survey suggests that uncertainty related to the General Election may have contributed to what appears to be a disappointing level of transactions in the housing market over the spring, 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.

“This is despite the difficulty that many first-time buyers are clearly having in taking their first steps onto the property ladder.”