A “depressed” stream of new instructions is both dampening activity in the housing market and pushing prices to new highs, according to the Royal Institution of Chartered Surveyors.
In its latest residential market survey, Rics shows the net balance of the new set of instructions at -20%, with average inventory levels falling from 42 in March to 37 in October per estate agent book.
This is the seventh month in a row that this measure has been negative.
As a result, sales momentum, despite rising demand from new buyers, shows a net balance of -9%, a negative reading for the fourth consecutive month.
However, for the next three months, survey respondents are more positive, giving a net balance of 10% and, for the next 12 months, a more modest net balance of 4%.
A second result of the low number of new instructions, according to Rics, is that a net balance of 70% of survey participants saw an increase in house prices, with a sharp increase in “virtually all regions”. . [and] country of the United Kingdom”.
And over the next 12 months, a net balance of 69% of respondents believe house prices will continue to rise, “this measure showing no signs of abating in recent months.”
On the rental side, tenant demand remains high, having increased over the past six quarters and landlord instructions have declined, with a net balance of -31%.
As with the sales market, this mismatch of supply and demand, according to Rics, means that near-term rental growth expectations are high and, “interestingly, London now has one of the highest expectations strong on this measure…a substantial turnaround”.
Rics reports that he has added additional questions dealing with environmental issues to this survey.
He describes an increase in interest in energy-efficient homes, but that hasn’t translated into real demand.
“Furthermore, specifies the report, the majority of the professionals questioned (approximately 54%) declare that the energy performance of a property has “very little impact” on its selling price.
“Meanwhile, around 23% believe that the energy efficiency rating has no impact on the selling price.”
Rics Chief Economist Simon Rubinsohn said: “While the mood music around interest rates appears to be changing, at the moment the strongest influence on the housing market is the imbalance persistent between demand and supply.
The report adds, however, that nearly three-quarters of those surveyed on this question believe the willingness to pay more for more energy-efficient homes will increase over the next three years.
“Inventory on agent books appears to have slipped to historic lows and this appears to support both the current price trend and expectations for next year.
“In the meantime, while there is likely to be some decline in activity the day after the stamp duty hiatus expires, most activity indicators currently remain solid. Indeed, the main challenge for forward-looking buyers could once again be the lack of choice of properties on the market.
“As long as there is a lack of choice for potential buyers, it is clear that buyers who aspire to be more climate-friendly will have to move down their priority list.
“Data in today’s report suggests that additional government funding and investment, along with attractive new financial solutions for homeowners, landlords and investors, could pave the way for the decarbonisation of UK homes.”