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

RICS Residential Market Survey (Nov.)

UK Housing Market Data Response
Written by Andrew Wishart

After mortgage approvals hit a 13-year high in October, surveyors reported that sales rose yet further in November to what they expect to be the high-water mark. With the outlook for employment shaky and the end of the stamp duty cut looming, we think that we may be nearing a peak in house prices too.

Surveyors report that activity peaked in November

  • After mortgage approvals hit a 13-year high in October, surveyors reported that sales rose yet further in November to what they expect to be the high-water mark. With the outlook for employment shaky and the end of the stamp duty cut looming, we think that we may be nearing a peak in house prices too.
  • The 19.1 sales recorded per surveyor in November was the highest since May 2016. (See Table 1.) And that may underplay the buoyancy of the market given mortgage approvals reached their highest level since 2007 in October. (See here.) But the balance of respondents expecting sales to rise over the next three months fell from +15% to -4%, suggesting that activity may now be plateauing.
  • While activity might be starting to turn the corner, prices are likely to continue to rise for a couple of months yet. After all, while the new buyer enquiries balance eased from +42% in October to +27% in November it still outstripped the new sales instructions balance, which dropped from +30% to +16%. As a result, the ratio of sales to stock on surveyors’ books should remain high, ensuring that competition between buyers keeps upward pressure on prices for the next month or two. (See Chart 1.)
  • The survey also suggests that London has been left behind in the surge in house prices. The past prices balance was just +9% in the capital compared to +66% nationwide. That reflects the reduced need for a short commute to the office, which has caused demand to be greatest in suburban and rural locations.
  • RICS survey respondents expect a slump in transactions next year, but not prices. We agree on the first point. (See here.) But in contrast to the survey respondents, we think that the government’s plans to end the furlough scheme and the stamp duty holiday in March, before the vaccine has allowed the economy to fully reopen, will cause prices to dip by 5% y/y in 2021. (See here.)

Chart 1: Ratio of Sales to Stock and House Prices

Sources: RICS, Nationwide

Table 1: RICS Residential Market Survey – Key Figures

2019

2020

Net balances seasonally adjusted

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Past prices

-10

0

16

28

8

-20

-31

-10

16

45

61

67

66

New buyer enquiries

-3

14

25

18

-72

-94

0

60

75

60

49

42

27

New sales instructions

-5

6

23

13

-70

-97

-16

42

57

44

36

30

16

Sales per surveyor (past 3m)

12.7

13.1

14.0

15.9

13.7

7.2

7.2

10.0

12.3

14.0

14.9

18.1

19.1

Unsold stocks per surveyor

40

43

43

42

40

35

35

39

41

42

42

43

45

Tenant demand

-3

18

21

26

-2

-48

-12

24

43

49

33

21

3

Landlord instructions

-29

-12

-12

-16

-32

-71

-43

-4

12

-1

-1

-8

-19

Rent expectations

12

25

28

29

-24

-39

-11

11

22

31

19

11

8

Source: RICS


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