Rents expected to creep back up in London

The number of properties coming on to the market in London for rent continues to fall, as tenant demand rises – according to the August 2018 RICS Residential Market survey – causing rent expectations to start to creep up following months of decline.

The latest numbers (which form a part of non-seasonally adjusted series) show a continuation of the decline in fresh rental stock in the capital, a trend that has been emerging on the back of tax changes on Buy-to-Let properties, while tenant demand has been rising firmly over recent months.  19% more respondents saw a drop in property being put on the rental market over the month, and this, set against the rise in tenant demand (+35% net balance) is causing rent expectations to creep back up after months of decline. 5% more respondents expect rents to rise rather than fall over the three months ahead.

Moving to the buying market, amidst varying reports on national house prices this summer, the August 2018 RICS Residential Market survey continues to show a diverse regional picture with price still solid in many parts of the UK.

The London market continues to be downbeat however, alongside parts of the wider South East, and to some extent, East Anglia but Scotland and Northern Ireland in particular are showing a healthy market, with a positive outlook for sales activity.

In London, newly agreed sales were flat over the month of August, with 35% more respondents expecting a decline (rather than rise) in sales over the next three months.   New instructions also remain in decline, with 11% more respondents noting a fall in August rather than a rise, although new buyer enquiries did edge up marginally, sales look unlikely to rise materially in the short term.  Nationally, 10% more respondents recorded a fall rather than rise in sales activity in August, which represents the most negative reading in five months.

Alongside this, prices in the capital continue to decline with the picture unlikely to change in the short term.  The negative London figure is impacting the national average leading the headline figure to signal no change in prices over the period as far as the national market is concerned.

Nationally, interest from new buyers remains more or less flat, with the latest results showing a slightly more cautious approach from property purchasers. This is not entirely surprising in the wake of the Bank of England’s decision to increase interest rates in August alongside the broader political and economic uncertainty.

Simon Rubinsohn, RICS Chief Economist, commented: “It is clearly very difficult to talk about the housing market at the moment without being acutely aware of the marked differences in trends across the UK. As the latest RICS results highlights, in many parts of the country the housing market actually remains quite firm.

“While a combination of a lack of stock and some level of uncertainty, both relating to the interest rate outlook and Brexit, has had an impact on activity, the overall picture in these areas is still encouraging. The story in London and the South East is, as has been widely recognised, rather more challenging but it is important that this is not seen as being indicative of the wider market.”

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