Housing market update sees lack of momentum

Published February 20th, 2018

The West Midlands’ housing market  displayed a lack of momentum in December, with buyer interest declining and the changes to Stamp Duty for first time buyers having little immediate effect, according to the December 2017 RICS UK Residential Market Survey.

In December, activity in the West Midlands’ housing market continued to drop.  Survey figures are seasonally adjusted, and after new buyer enquiries came close to stabilising in November, 33% more respondents noted a decline in demand (as opposed to an increase) in the month of December. 

When contributors were asked whether they have seen an increase in first time buyer enquiries following changes to Stamp Duty in the Autumn Budget, an overwhelming majority of 86% across the UK as whole said they hadn’t.  

While this could be in part due to the time of year, respondents were also asked to consider the likely impact on the market over the coming months. Nationally, the majority of respondents (66%) anticipated the change having little consequence, whilst 12% felt it would result in higher overall activity.

Moving to the resulting sales, agreed transactions fell across the region with 39% more respondents reporting a decline in volumes over the month, the same sentiment as central London. Elsewhere, Scotland, Northern Ireland and the North East region were the only areas to suggest stronger transactions in December. Looking ahead, respondents in the West Midlands remain cautious about sales, with the majority not expecting the volume of transactions to increase over the coming three months. However, respondents are more optimistic over the next twelve months with activity anticipated to pick-up across over the year to come (London also recorded its first positive reading since last June).

Looking at supply, new instructions continued to decline, at a faster rate than other regions, and extending a run of 27 months. Comments from respondents continue to emphasise the adverse impact this is having on the market. 

Looking at prices, the West Midlands price balance moved to +35% in December following a net balance of +26% in November. The three month price expectations series however remains negative across the region with the net balance standing at -10%, highlighting a lack of conviction surrounding the near term outlook.

In the lettings market, tenant demand continued to fall during December (on a non-seasonally adjusted basis) albeit the pace of decline eased somewhat from the previous report. Meanwhile new landlord instructions declined at a slightly faster rate. As a result, rental growth expectations remain positive for the three months ahead (net balance moving to +29% from +26%).

Simon Rubinsohn, RICS Chief Economist commented: “The initial feedback from the market doesn’t suggest that the change in the Stamp Duty regime announced in the budget is going to have a material impact on activity. Indeed, the risk was always that a good portion of the benefit would be capitalised in the price, therefore limiting the benefit for the first-time buyer.

“Challenges over affordability may have grown across the UK but they are clearly having a bigger impact in some parts of the country than others. This is clearly evident in the sales expectations figures which still remain in positive territory in more than half of the areas surveyed in the report.”

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