The October RICS Residential Market Survey shows the improvement in market conditions is becoming more widespread.
The pace of demand exceeded that of supply in every part of the country, pushing up prices. At the national level, the gap between demand and supply, as measured by our net balances, is now at its greatest since May 2009.
This is helping to drive price expectations, which at the three month horizon are positive across all regions except the North (while they are positive for all regions at the twelve month horizon). Sales expectations have also been buoyed by the recent surge in demand, with the net balance climbing to it’s highest value on record.
Alongside this, the sales-to-stock ratio reached its highest value since the onset of the financial crisis, at 32.9, as average stocks per surveyor reached a multi-year low while sales per surveyor reached a multi-year high. This is reflective of the relatively slow growth in new stock coming to the market compared to the level of transactions.
The headline price net balance, at 57, reached its highest level since 2002. Certain policies such as the Bank of England’s Funding for Lending scheme, which has contributed to the current low level of mortgage rates, and the government’s Help to Buy scheme (highlighted by many respondents to the survey) are helping to boost the demand for housing.
The survey’s quantitative measures show that over the coming twelve months, prices are expected to increase by 3% nationally (up from 2.6% last month) and by 4.5% per year for the next five years.
The net balance of respondents expecting prices to rise over this period remains almost unchanged, at 64, while confidence in increasing sales volumes over the year is also broadly unchanged.
Respondents are also noticing increases in average loan-to-value (LTV) ratios and this supports wider evidence that mortgage finance conditions have been improving. The average perceived LTV ratio according to the survey now stands at 85.7% for first time buyers and 73.7% for buy-to-let landlords (compared to 82.2% and 71.8% at the start of the year respectively).
In the rental market, conditions are little changed over the month, with landlord instructions more or less stable and moderating growth in tenant demand, partly because mortgage finance is becoming more readily available. Rent expectations are more or less unchanged from last months, and are expected to grow by 1.7% over the coming 12 months.
Regionally, London and the South East remained the strongest performers with price momentum firmer across these areas than elsewhere and with respondents more confident of future price increases than any other region.