Shortage of housing supply is concern for lettings and sales sectors

Simon Rubinsohn

A shortage of supply in both the North West lettings and sales sectors continues to present a huge challenge for the housing market.

This is according to the January 2017 RICS (Royal Institution of Chartered Surveyors) UK Residential Market Survey.

In January, new landlord instructions in the North West’s lettings market failed to improve for the third consecutive month.  

Moreover, respondents predicted that this issue would worsen over the medium term and indicated that they expected landlords to decrease the size of their portfolios over the next three years.
 
Changes to stamp duty in April alongside scheduled cuts to mortgage interest tax relief, were both seen as important factors diminishing the attractiveness of buy-to-let as an investment as 28% more respondents felt that landlords were likely to decrease (rather than increase) the size of their portfolio over the next twelve months.

Over the next three years, 26% more contributors expected landlords to scale-back their portfolios.

It is, however, worth noting that the sentiment survey was obtained prior to the latest housing announcements.

During the three months to January, tenant demand for rental properties in the North West continued to increase with the continued imbalance between supply and demand expected to squeeze rents higher. The exceptions to this pattern across the UK are to be found in London and Scotland where tenant demand is slipping back a little.  

Over the next five years, rental projections point to a cumulative increase of just over 25%, outpacing house price inflation over this time period (respondents anticipate prices will rise a little under 20% on the same basis).  

Richard Towler of Eden Lettings & Management in Penrith, said: “The market is yet to react obviously to income tax changes and threats to ban agents’ fees. Reaction to the latter will not happen until change is implemented but the result is more likely to be job losses and falls in service standards.”

Meanwhile in house purchases, new buyer enquiries increased in the North West during the month of January, with 8% more respondents reporting a rise in buyer enquiries (up from 5% the previous month).

New instructions (homes coming on to the market) having remained flat for the past few months deteriorated further in January, with 57% of respondents seeing a fall in new instructions last month, rather than a rise, leaving  average stock levels on agent’s books still close to historic lows.

At the same time, sales in the North West fell for the second month in succession.

However, sales are predicted to improve in the near term with 23% more respondents in the North West expecting a rise rather than fall over the next three months.

What’s more, the balance of respondents predicting that sales will increase over the year to come reached a one year high (37%).

Derek Coates of Venmore estate agents in Liverpool said: “January for us was very busy with regard to sales enquiries and actual sales agreed.

“However, there is a lack of properties coming on to the market which must, eventually, lead to price inflation.”

More than a third of respondents (68%) in the North West saw a rise in prices, rather than a fall in January, as prices tick back up.

This was the survey’s highest reading for the third consecutive month. Looking across the UK, prices deteriorated slightly in central London for the second straight report and have now been in negative territory for eleven consecutive months.

Most other parts of the UK continue to see prices rise, but not as fast as the North West it seems.

Prices are expected to continue to rise over both the next three and twelve months across the UK in all regions except central London.

Simon Rubinsohn, RICS chief economist, said: “The scale of the challenge the Government faces as it announces its new approach to housing is clearly demonstrated in the results from our latest survey.

“Not only are the headline price and rent series pointing to further increases over the course of this year, but more significantly, the medium term view of RICS professionals working up and down the country is that both house prices and rents will over the medium term continue to grow at a faster pace than wages, putting even greater pressure on affordability.

“Whether the measures announced can ease this this trend remains to be seen.”

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