Property Leeds, Wakefield, WetherbyRoyal Institution of Chartered Surveyors Housing Market Survey - May 2007
RICS Economics May 2007
- House price rises slow but are still firm
- Surge in new instructions as sellers seek to avoid upfront HIP costs
- New buyer enquiries stabilising on good economy
House price inflation reverted back to its slowing trend in May after regaining some momentum over the past quarter, but it is still above the survey’s long run average. This month’s slowdown in price growth comes amid a surge in new property supply, though underlying demand conditions are holding up in light of a strong economy. Strongest price growth continues in Scotland, Northern Ireland and London.
New house buyer enquiries stabilised in spite of the May interest rate hike, indicating that underlying demand conditions are still good. The impact of the current interest rate tightening cycle on new buyer enquiries has so far been quite limited with the absolute level of demand still high in light of buoyant economic conditions.
New instructions to sell property increased at the fastest pace in the survey’s history. According to surveyors, the surge in new instructions was driven by increasing numbers of sellers listing their property early in order to avoid the upfront costs of assembling Home Information Packs (HIPs). However, given that the full implementation of HIPs has since been delayed, we expect a sharp reversal in new instructions in June.
In spite of this month’s surge in new instructions, the stock of property on surveyor’s books was more or less unchanged. Nevertheless, the ratio of completed sales (over the last three months) to the stock of available property on the market fell to the lowest level since September, as a result of a further drop in sales activity. This indicates that market conditions have loosened.
Four interest rate increases since last August as well as the bank of England’s continued hawkishness, has further depressed surveyor confidence in the price outlook. However, surveyor confidence in the sales outlook rebounded slightly and is now only slightly below the survey’s long run average.
In England, price growth was strongest in London although it slowed compared to last month. Elsewhere in the country, firm price growth took place in the South East, South West, East Anglia and North West, although it slowed in all four regions. Price growth picked up slightly in Wales and Yorkshire and Humberside, where it remains moderate. In the West Midlands prices increased slightly, whilst in the East Midlands and the North they eased.
Prices
House price inflation reverted back to its slowing trend in May but it is still above the survey’s long run average. For the three months to May, 23.9% more surveyors reported a rise in prices than a fall, down from 28.5% in April.
Scotland continues to lead the way in price growth, whilst Northern Ireland experienced a slowdown though price rises are still very strong. In England, price growth was strongest in London although it slowed compared to last month. Elsewhere in the country, firm price growth took place in the South East, South West, East Anglia, and North West, although it slowed in all four regions. Price growth picked up slightly in Wales, Yorkshire and Humberside, and the West Midlands although it remains moderate. In the East Midlands and the North prices fell slightly.
Property sales
Completed property sales for the quarter to May fell to 25.1 per surveyor from 26.6 in April. On year ago levels sales were down by 3.7% compared to a rise of 4.8% last month. April marks the first annual fall in completed property sales since October 2005.
Stocks of Property
The stock of unsold property on surveyors’ books remained more or less static compared to last month after falling during the first three months of the year. Average stocks per surveyor were 61.4 in May compared to 61.5 in April and were down 14.3% 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 second consecutive month to 40.9% in May from 43.3% in April. Market conditions have loosened over the last two months but are still tighter than the survey’s long run average of 37.1%.
Newly Agreed Sales / Expected Sales
Newly agreed sales increased moderately in May due to particularly large increases in East Anglia and the South West. Moderate increases took place in the North West and West Midlands, whilst in London, the South East, Yorkshire and Humberside and the East Midlands, newly agreed sales declined.
Surveyor confidence in the sales outlook for the next three months rebounded slightly and is only slightly below the survey’s long run average. In spite of four interest rate hikes since last August, confidence in underlying market conditions is still firm. Confidence improved across most regions in the survey, particularly the South East, Wales, Yorkshire and Humberside and London. Confidence fell moderately in the South West, but quite sharply in East Anglia and the East Midlands.
Expected Prices
Four interest increases since last August as well as the bank of England’s continued hawkishness, has further depressed surveyor confidence in the price outlook. Confidence fell for the seventh consecutive month to the lowest level since August 2005, which is well below the survey’s long run average.
Confidence fell across the South of England, the Midlands and Wales, whilst in the North of England confidence improved slightly. Confidence fell slightly in London, the South East and the South West as well as in the East and West Midlands. In Yorkshire and Humberside, The North and North West confidence improved slightly.
New Buyer Enquiries
New buyer enquiries stabilised in spite of the May interest rate hike, indicating that underlying demand conditions are still good. The impact of the current interest rate tightening cycle on new buyer enquiries has so far been quite limited with the absolute level of demand still high in light of buoyant economic conditions.
New buyer enquiries increased sharply in East Anglia and the South West, while firm growth took place in the West Midlands. Elsewhere, new buyer enquiries fell sharply in Wales and the East Midlands, while moderate falls took place in London, the South East, Yorkshire and Humberside, the North and the North West.
New Instructions
New instructions to sell property increased at the fastest pace in the survey’s history. According to surveyors, the surge in new instructions was driven by increasing numbers of sellers listing their property in order to avoid the upfront costs of assembling Home Information Packs (HIPs). However, given that the full implementation of HIPs has been delayed, we expect a sharp reversal in new instructions to take place next month.
New instructions increased sharply throughout all regions. The West Midlands and Yorkshire and Humberside saw the sharpest increases in new instructions, while the slowest increases took place in the North and North West though rises in these regions were still strong.
