RICS Residential Market Survey (Dec.) - Capital Economics
UK Housing

RICS Residential Market Survey (Dec.)

UK Housing Market Data Response
Written by Gabriella Dickens

Despite the RICS data pointing to a jump in active demand and supply in December, we doubt that will translate into a substantive increase in either transactions or house price growth this year. Indeed, with the housing market fundamentals unsupportive, we expect only a modest pick-up in activity in 2020.

Strong end to 2019 according to RICS

  • Despite the RICS data pointing to a jump in active demand and supply in December, we doubt that will translate into a substantive increase in either transactions or house price growth this year. Indeed, with the housing market fundamentals unsupportive, we expect only a modest pick-up in activity in 2020.
  • According to the RICS, housing activity intensified at the end of 2019. Indeed, the new enquiries balance suggested that active demand picked up, jumping from a dismal reading of minus 5% in November to plus 17% last month – the highest reading in four years. What’s more, sellers also seemed to return to the market, with the new instructions balance rising to a six-year high of plus 9%, up from minus 7% in November.
  • However, we doubt that this marks the start of a prolonged recovery in housing market activity. Admittedly, with at least some of the political uncertainty that plagued 2019 easing, following the decisive election result, and interest rates on track to remain on hold this year, there is room for housing transactions to rise modestly over the coming months.
  • But housing fundamentals are not conducive to a significant increase in either prices or transactions. First, with house prices around 15% above their pre-crisis peak, they are already very high. Second, a shallower path for interest rates should boost transactions but only modestly, as mortgage interest rates are already close to their floor. And our forecast for interest rates to stay ‘lower for longer’ reflects a weaker economic backdrop, so any support from low lending rates would be partially offset by a decline in buyer confidence. And given the political backdrop in December, we wouldn’t be surprised if this jump was a one-off.
  • In all, December’s survey data do little to change our view that transactions and house price growth are set to rise only moderately this year.

Chart 1: RICS New Buyer Enquires Balance and New Sales Instructions Balance

Source: RICS

Table 1: RICS Residential Market Survey – Key Figures

2018

2019

Net balances seasonally adjusted

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Past prices

-21

-21

-25

-21

-21

-9

-1

-10

-4

-2

-6

-11

-2

New buyer enquiries

-21

-32

-37

-25

-24

-3

9

2

0

-15

-14

-5

17

New sales instructions

-22

-24

-26

-27

-31

-11

1

-4

-6

-37

-27

-7

9

Sales per surveyor (past 3m)

13.8

13.5

13.3

13.2

12.8

13.0

12.5

13.1

13.0

12.7

12.3

13.1

13.2

Unsold stocks per surveyor

42

43

42

42

42

41

41

42

43

42

43

41

43

Tenant demand

-4

7

10

13

12

15

29

23

23

22

21

-3

18

Landlord instructions

-22

-12

-15

-19

-17

-11

-10

-9

-14

-9

-21

-29

-12

Rent expectations

13

16

22

18

22

30

33

25

26

24

25

12

25

Source: RICS


Gabriella Dickens, Assistant Economist, 020 3974 7421, gabriella.dickens@capitaleconomics.com