Brexit uncertainty continued to subdue the London housing market in March, according to the RICS UK Residential Market Survey, March 2019. Looking ahead, the lack of momentum is likely to persist for a while longer, although respondents still envisage modest improvements in activity twelve months ahead.
In March, enquiries from new buyers saw the seventh negative reading in a row, with 16% of respondents seeing a fall rather than a rise in buyer demand in London. Significantly, demand fell across all parts of the UK in March.
With buyer interest waning, a net balance of -20% of respondents reported a fall in agreed sales in the capital in March. This is consistent with a drop in the HMRC measure of transactions over the coming months (reflecting the RICS series role as a lead indicator). Beyond then, there is a little more optimism in the market, with sales anticipated to rise in London and the UK as a whole over the course of the next year.
The ongoing decline in new instructions and new property coming on to the market continues, with a consistent fall since July 2018 resulting in a net balance of -27% for new instructions in London in March 2019. As a result, despite a reduction in agreed sales, average stock levels on estate agents’ books remain at 39 properties per branch.
Looking at house prices, 62% of respondents saw a decline rather than rise in prices in the London area in March, the weakest level in the country. The measure (as a lead indicator) is still pointing to a modest fall in house prices over the next couple of quarters.
London along with the South East continues to display the weakest sentiment regarding prices, with Scotland and Northern Ireland the only parts of the UK to have seen sustained price growth on a consistent basis, over the past two months. Looking ahead, a net balance of -11% of respondents anticipate house prices to fall further over the next twelve months in London.
In the lettings market, demand from tenants edged up in March 2019 while landlord instructions fell once more. On the back of this, contributors are pencilling in a broadly flat trend in rents over the next twelve months.
Simon Rubinsohn, RICS Chief Economist, said: “Brexit remains a major drag on activity in the market particularly in the capital with anecdotal evidence pointing to potential buyers being reluctant to commit in the face of the heightened sense of uncertainty. Whether any deal provides the shift in mood music envisaged by many respondents to the survey remains to be seen but as things stand, there is little encouragement to be drawn from key RICS lead indicators.
“Arguably more significant still are the signs that developers are continuing to adopt a more cautious stance with the trend in new residential starts now flatlining. Against this backdrop, there is little possibility of delivering the uplift in supply necessary to address the ongoing housing crisis.”
Robert Green, MRICS, of John D Wood & Co in Chelsea, commented: “We have seen strong activity through the first half of March, with the second half much quieter as buyers and sellers all stop and stare at Westminster in disbelief. Underlying market is stronger than it has been for a while.”