9th March 2017

Modest growth is continuing in the UK property market but the outlook is less positive in London than the rest of the country, according to the latest report from chartered surveyors.

Some 24% have seen a rise rather than a fall in prices over the past three months and the North West was seen to have performed particularly well with a net balance of 64% reporting rising prices.

However, central London bucked the growth trend with 62% of respondents saying that prices had fallen rather than risen during the same period.

But it is in the private rented sector that the biggest change is likely with the report from the Royal Institution of Chartered Surveyors (RICS) saying that rents are predicted to rise by in excess of 20% over the next five years

Overall sales volumes were broadly unchanged for the third month in succession and new buyer enquiries were again flat and have now failed to see any meaningful growth since November 2016. The pace at which new instructions are dwindling appears to be particularly acute in the North West of England and the West Midlands.

Near term expectations remain positive but point to a relatively modest rise in activity in the months to come. The headline price balance came in at +24% in February, unchanged from a downwardly revised figure of +24% in January.

However, surveyors have now reported a fall rather than a rise in London prices for a full year with most of this activity concentrated in the inner boroughs. However, sales activity appears to have picked up in London after nearly a year of negative to flat growth.

Tight supply conditions across a majority of the regions coupled with stable sales activity has led to a further erosion of available stock for sale, with the average stock per surveyor just shy of a record low. Indeed, respondents across most parts of the UK continue to highlight in their comments the supply shortage to be very dominant feature of the market at present.

Wales and Northern Ireland reported the strongest expected improvements, followed by Scotland and the North West of England.

In the lettings market, tenant demand rose for the third consecutive month as 15% more respondents noted an increase rather than a fall on a non-seasonally adjusted basis. But growth in demand is more modest than a year ago when 29% more respondents reported an increase.

The flow of new landlord instructions, however, reportedly deteriorated, with a net balance of -10% the weakest reading in over two years. The report says that this negative trend is likely to persist over at least the next couple of months as changes to mortgage interest tax relief start to take effect in April.

As such, rent expectations remain in firmly positive territory with a net balance of +24% in February. Looking ahead over the next 12 months, survey respondents forecast rents to rise by a further 2.7% and to accelerate to an average 4.4% per annum over the next five years.

However, the London rental market continues to be an exception with surveyors reporting weak tenant demand along with negative near term rental expectations.