House prices rising firmly in South West

Momentum is continuing to ebb in the South West housing market as both newly agreed sales and buyer interest remains flat in April.  The results of the RICS UK Residential Market Survey, April 2017, general consensus point to new instructions continue to drop in the region.  Anecdotal evidence cites a lack of choice; uncertainty due to the calling of an early election; and the ramifications of stamp duty changes as factors hampering activity.

The lack of choice for would-be buyers across the South West is still a key issue and in April new instructions remained negative for a third month in a row, leaving average properties on estate agents books hovering close to record lows. -4% more respondents saw new instructions drop in April, and perhaps consequently, new buyer enquiries were broadly unchanged having failed to see any meaningful growth since November 2016.

Despite stagnant buyer demand, South West respondents reported agreed sales were stronger compared to last month. Overall 20% more respondents saw a rise in sales in the region, this is up from -6% last month.   

Looking ahead however, sales across the South West are expected to remain at a moderate level over the next three months as 11% more respondents expect to see an increase in sales over the time period. Expectations have moderated overall in the UK when compared to the March survey.

Despite the subdued backdrop, 44% more respondents believed prices increase in April, this is up from 22% in the previous month due to the moderate levels of stock. As such, house prices continue to rise in the South West, with the pace of growth remaining steady over the last five months.

Looking ahead at for near term price expectations in the South West, these have risen slightly with the net balance increasing to 21% (from +17%) suggesting that house price inflation is anticipated to accelerate in the three months ahead.  The twelve month expectations also predict that the South West will see growth in house prices.

In the South West lettings market, the quarterly data shows tenant demand continues to increase albeit at a slower pace than the previous quarter. At the same time, landlord instructions were increasingly low leading respondents to expect rents to grow modestly in the region.

Roger Punch FRICS of Marchand Petit in South Devon, commented: “The overriding observation is the continuation of the lack of new properties coming on to the market. Potential sellers should gain confidence in the availability of keen and able buyers.  This near stagnation will not change until we see more new houses built across the South West, which still has a great deal of catching up to do having been subdued for almost all of the last decade.”

Simon Rubinsohn, RICS Chief Economist, commented: “Although the picture clearly does vary across the country, the bulk of the feedback we are receiving points to a fairly flat summer for both activity and prices. Lack of stock on the market remains a key challenge for the sector with recent and forthcoming tax changes having a material impact on transaction levels, particularly at higher price points. Uncertainty relating to the forthcoming general election is also highlighted by some respondents as a reason for inertia.

“It is noticeable in the April report that the amount of new rental instructions coming through to agents is continuing to edge lower which is not altogether surprising given the changing landscape for buy to let investors. One consequence of this is that rents are expected to continue rising not just in the near term but also further out and at a faster pace than house prices.”