Price expectations turn more buoyant

by James Powell

Price expectations turn more buoyant

The August 2013 RICS Residential Market Survey underscores a further improvement in market conditions. The results indicate that increases in prices, buyer enquiries, new vendor instructions and sales are becoming increasingly widespread across the country. 

Official stimulus measures (including both Funding for Lending Scheme and Help-to-Buy) appear to be part of the reason for the pick-up in activity according to survey respondents. The former, in particular, has played a role in helping to improve mortgage availability. Indeed, the survey suggests that respondents perceive there has been a rise in typical loan-to-value ratios on offer for first-time buyers, existing owners and buy-to-let landlords since the end of the last year.

Average sale per surveyor (over the last three months) increased to 17.9 in August, the highest level since January 2010. However, average stocks per surveyor also picked up over the month, leaving the sales to stock ratio more or less unchanged at 26.5%. The sales to stock ratio - a key gauge of market slack - is over three percentage points higher than it was twelve months ago, and more than double its nadir back in December 2008. Even so, it is still well below its long run average of 32.4% 

In other words, although sales activity is beginning to gain some momentum, it still has a long way to go before conditions are back to ‘normal’.  The improvement in market conditions is also reflected in the survey’s forward looking indicators. The net balance readings for price expectations over the next three and twelve months, continue to advance further into positive territory. Moreover, respondents to the survey now expect prices across the whole of the country, on average, to increase by 2.2% over the coming year and by 4.4% in each of the next five years. At the start of this year, these respective figures were 0.6% and 3.4%.

From a regional perspective, the improvement in market conditions is broad based. Indeed, while London continues to outperform in terms of price momentum, the national ex-London price balance is still +34 (versus the headline reading of +40). Moreover, a range of the other measures included in the survey show increases that are now more widespread outside of London.

In the rental market, the picture remains broadly unchanged from last month at the headline level.  Tenant demand and new landlord instructions are both continuing to increase, with the former outstripping the latter, in turn pushing rent expectations higher. Indeed, respondents to the survey now expect rents across the whole of the country, on average, to increase by 1.9% over the coming year and by 4.3% in each of the next five years. These figures are slightly up compared to the end of last year, but not by much.

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