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

RICS Residential Market Survey (Dec.)

UK Housing Market Data Response
Written by Andrew Wishart

Sales and prices rose further in December, but there were clear signs that momentum was waning even before the new lockdown was imposed. Indeed, with the end of the stamp duty holiday looming, most surveyors now expect prices to fall. We forecast a 5% drop in house prices this year.

Waning momentum leads surveyors to expect a drop in prices

  • Sales and prices rose further in December, but there were clear signs that momentum was waning even before the new lockdown was imposed. Indeed, with the end of the stamp duty holiday looming, most surveyors now expect prices to fall. We forecast a 5% drop in house prices this year.
  • As we already knew that growth in the Nationwide house price index rose from 6.5% y/y to 7.3% y/y in December it was little surprise that the RICS past prices balance remained very high, at +65% in December.
  • But there are clear signs that momentum is waning. While the newly agreed sales balance remained positive, it slipped back for a fifth consecutive month. Meanwhile, the number of sales per surveyor edged up to a fresh four-year high, but the increase compared to the previous month was the smallest since May. (See Table 1.) The further drop in the new buyer enquiries balance from +26% in November to +15% in December suggests that the slowdown in sales growth will continue.
  • A growing majority of surveyors expect sales be lower in three months’ time. Unsurprisingly given the end of the stamp duty holiday in March, the sales expectations balance fell from -6% to -22%.
  • The survey suggested that house price growth will also peak soon. The ratio of sales to unsold stocks, a reliable leading indicator of house price growth, fell for the first time since April. (See Chart 1.) Surveyors are also now anticipating a drop in prices. The expected prices balance plummeted from +10% to -13%.
  • The slowdown in sales is no surprise given the stamp duty holiday ends in two months. And surveyors’ expectation that sales and prices will drop thereafter is in line with our own view. With wider policy support, such as the furlough scheme, the repossessions ban, and mortgage repayment holidays due to end around the same time, we suspect that house prices will drop by 5% this year. (See here.)

Chart 1: Ratio of Sales to Stock and House Prices

Source: RICS

Table 1: RICS Residential Market Survey – Key Figures

2019

2020

Net balances seasonally adjusted

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Past prices

1

16

28

8

-18

-31

-9

16

45

61

66

66

65

New buyer enquiries

16

25

18

-72

-93

0

60

75

60

49

40

26

15

New sales instructions

11

22

12

-69

-97

-15

42

56

44

35

27

15

7

Sales per surveyor (past 3m)

13.0

13.9

15.8

13.7

7.2

7.3

10.0

12.4

14.1

14.9

18.0

19.0

19.2

Unsold stocks per surveyor

42

42

42

40

35

35

39

41

42

42

43

45

46

Tenant demand

18

21

26

-2

-48

-12

24

43

49

33

21

3

15

Landlord instructions

-12

-12

-16

-32

-71

-43

-4

12

-1

-1

-8

-19

-12

Rent expectations

25

28

29

-24

-39

-11

11

22

31

19

11

8

20

Source: RICS


Andrew Wishart, Property Economist, +44 (0)7427 682411, andrew.wishart@capitaleconomics.com