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

RICS Residential Market Survey (Jan.)

UK Housing Market Data Response
Written by Andrew Wishart

The January RICS survey suggests that the housing market has embarked on the next leg of its journey through the pandemic. The lockdown and the looming end of the stamp duty holiday have caused a sharp drop in buyer demand and sales. But the jury is still out on what the impact on prices will be.

Housing market cooling sharply

  • The January RICS survey suggests that the housing market has embarked on the next leg of its journey through the pandemic. The lockdown and the looming end of the stamp duty holiday have caused a sharp drop in buyer demand and sales. But the jury is still out on what the impact on prices will be.
  • The clear message from the January RICS survey is that housing market activity is entering another lull. The newly agreed sales balanced dropped from +15% to -18%, reflecting that sales agreed last month are unlikely to complete in time to benefit from the stamp duty holiday. And the sharp drop in the new buyer enquiries and sales instructions balances suggests there is little activity in the pipeline. (See Chart 1.)
  • The impact that will have on prices is less clear cut. The past prices balance remained strong, but as the survey asks how prices have changed over the last three months its old news. Rightmove, Nationwide and Halifax all reported a drop in house prices in January. (See here.) Looking ahead, the drop in buyer demand and in newly-agreed sales will weigh on prices. But the decline in sales instructions and falling stock per surveyor should dampen the downward pressure. (See Table 1.) Nonetheless, a balance of 15% of surveyors expect prices to fall over the next three months.
  • Meanwhile the quarterly lettings market results continued to show big disparities in demand between regions. The national tenant demand balance was +12% in Q1, albeit down from +20% in Q1. But in London tenant demand continues to fall, with a balance of -28%.
  • The big drops in agreed sales and buyer demand suggest we are right to expect a deep slump in mortgage approvals and transactions as the stamp duty holiday ends. While sales instructions and stock are also dropping back, sharp falls in transactions are almost always accompanied by reductions in prices. On balance, we expect a 4% dip in house prices this year.

Chart 1: New Sales Instructions & Buyer Enquiries

Source: RICS

Table 1: RICS Residential Market Survey – Key Figures

2020

2021

Net balances seasonally adjusted

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Past prices

18

28

7

-18

-30

-9

17

45

61

66

63

63

50

New buyer enquiries

33

18

-71

-93

-1

60

74

59

48

39

24

12

-28

New sales instructions

32

12

-68

-97

-16

41

56

43

34

26

14

4

-38

Sales per surveyor (past 3m)

13.9

15.8

13.6

7.2

7.3

10.1

12.5

14.1

15.0

18.0

19.1

19.0

17.8

Unsold stocks per surveyor

42

42

40

35

35

39

41

42

42

43

45

46

43

Tenant demand

21

26

-2

-48

-12

24

43

49

33

21

3

15

9

Landlord instructions

-12

-16

-32

-71

-43

-4

12

-1

-1

-8

-19

-12

-17

Rent expectations

28

29

-24

-39

-11

11

22

31

19

11

8

20

16

Source: RICS


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