Royal Institute of Chartered Surveyors Housing Market Survey - June 2007
RICS Economics June 2007
- House price inflation more than halved in June
- Subdued market conditions evident across most of England and Wales
- New house buyer enquiries decline at the fastest pace since February
- New property instructions slump in June
House price growth eased in June to half the pace of the previous month. The national price balance fell below the survey’s long run average for the first time since the mini-boom began in early 2006. Supply conditions showed a turn around, with new instructions falling sharply in June as many vendors had brought forward their instructions into May because of the prospective introduction of HIPs.
June’s slowdown in price rises has resulted from weaker demand as the four interest rate hikes since last August have weighed on buyer affordability. New buyer enquiries declined at the fastest pace since February, a more concrete sign that potential buyers are taking note of rising borrowing costs and the possibility of further rate hikes later in the year. Nevertheless, the impact of the current rate tightening cycle on new buyer enquiries is still more subdued than in the previous interest rate cycle of 2003/2004 due to strong economic conditions.
New instructions to sell property fell sharply in June, as was to be expected. Many vendors brought forward the listing of their homes into May, in order to avoid the upfront costs of the now delayed Home Information Packs (HIPs).
Against a softer demand background, the stock of unsold property on surveyor’s books rose fractionally in June, while sales fell. Both factors contributed to a slight fall in the ratio of completed sales (over the last three months) compared to the stock of unsold property to 39.2% in June. Market conditions are loosening though are still tight, with sales to stock ratio above the survey’s long run average of 37.1%.
Four interest rate increases since last August and the prospect of at least two more hikes before the end of the year (one which materialised in July) has depressed surveyor confidence in the price outlook, which as now turned neutral. Surveyor confidence in the sales outlook almost halved, falling to the lowest level since June 2004.
London has overtaken Scotland in the house price growth league table but the strongest house price rises are still taking place in Northern Ireland. In England, outside of London, house price inflation has clearly moderated, with for example boom, conditions in the South East coming to an end. For regions of the North of England and the Midlands, the moderate to firm price rises of six months ago have been replaced by more subdued conditions with prices now in slight decline in the Midlands, Yorkshire and Humberside and Wales.
Prices
House price growth eased in June to half the pace of the previous month. The national price balance fell below the survey’s long run average for the first time since the mini-boom began in early 2006 and is at the lowest level since January 2006. For the three months to June, 10.6% more surveyors reported a rise in prices than a fall, down from 22.5% in May.
London has overtaken Scotland in the house price growth league table but the strongest house price rises are still taking place in Northern Ireland. In England, outside of London, house price inflation has clearly moderated, with for example boom conditions in the South East coming to am end. For regions of the North of England and the Midlands, the moderate to firm price rises of six months ago have been replaced by more subdued conditions with prices now in slight decline in the Midlands, Yorkshire and Humberside and Wales.
Property Sales
Completed property sales for the quarter to June fell to 24.5 per surveyor from 25.0 in May. On year ago levels sales are down by 6.1% compared to 3.7% in the previous month. June marks the largest annual fall in property sales since September 2005.
Stocks of Property
The stock of unsold property on surveyors’ books increased fractionally, rising to the highest level since February 2007. Average stocks per surveyor were 62.5 in June compared with 62.0 in May and are down 11.1% from year ago levels.
Sale to Stock Ratio
The ratio of completed sales (over the last three months) compared to the stock of unsold property on the market fell for the third consecutive month to 39.2% in June from 40.4% in May. Market conditions are loosening further but the sales to stock ratio is still higher than the survey’s long run average of 37.1%.
Newly Agreed Sales / Expected Sales
Newly agreed sales declined fractionally in June. Large falls took place in Yorkshire and Humberside and the East Midlands. Moderate falls took place in London, East Anglia, the South West, the West Midlands and Scotland. Newly agreed sales increased in the South East, Wales, North and the North West.
Surveyor confidence in the sales outlook or the next three months almost halved, falling to the lowest level since June 2004. Four interest rate hikes since last August and the prospect of another hike in July (which later materialised) has pushed confidence well below the survey’s long run average. Confidence fell across all regions except for East Anglia, the North and the West Midlands.
Expected Prices
Four interest rate increases since last August and the prospect of at least two more hikes before the end of the year (one which materialised in July) has further depressed surveyor confidence in the price outlook. Confidence is now neutral and has fallen for eight consecutive months.
Confidence fell across all regions in the survey apart from East Anglia and the South West, where it increased moderately. Confidence is negative in Wales, Yorkshire and Humberside, the North, the West Midlands and the East Midlands. In Scotland and London confidence remains firm, though it has come off sharply since the beginning of the year.
New Buyer Enquiries
For June, new buyer enquiries declined at the fastest pace since February, giving more concrete signs that potential buyers are now responding to interest rate rises. Nevertheless, the impact of the current rate hikes on new buyer enquiries has been more subdued than in the previous rate tightening circle of 2003/2004 due to strong underlying conditions in the economy.
New buyer enquiries fell outright across all regions except for Wales, the West Midlands and Scotland, where growth in enquiries actually rose. Heavy falls in enquiries took place in London, East Anglia Yorkshire and Humberside, the North, North West and the East Midlands. Moderate falls took place in the South East and South West.
New Instructions
New instructions to sell property fell sharply in June though this development was expected. This is because many vendors brought forward property listings into May in order to avoid the upfront costs of assembling the now delayed Home Information Packs (HIPs). Taking May and June together as a whole, the trend since March of gradually rising instructions remains intact.
New vendor instructions fell very sharply in the South East, East Anglia Yorkshire and Humberside, the North West and the East Midlands. New instructions fell moderately in the South West, while in London, Wales, the North and the West Midlands, new instructions rose moderately. In Scotland, new instructions increased firmly.
