Improvements underpinned by a lack of supply (UK)

Sentiment in the housing market continues to improve according to the latest RICS UK housing market survey published today (11 August 2009). Significantly, 8% more chartered surveyors expect prices to rise rather than fall over the next three months, the highest reading for this series since April 2007.

The improved optimism for prices can at least partly be attributed to the fact that increased interest from new buyers has not been matched by supply coming onto the market. New buyer enquiries remained high in July with a net balance of 63% reporting a rise rather than a fall; this is marginally lower than the previous month but still indicative of a growing level of interest in the market. At the same time the levels of stock on estate agents books remains very low.

In July more chartered surveyors reported an increase than a decrease in the number of new instructions for the first time since May 2007. However the positive net balance of just 2% suggests that vendors are still a little reluctant to put properties on the market.

Housing market activity, in terms of actual transactions, also continued to rise during July. The monthly increase in the agreed sales net balance pushed that measure to its best level in a decade. That is consistent with the further improvements in the average sales per surveyor series. On average, surveyors sold 15 properties over the past three months compared with the previous reading of 13. As a result the sales-to-stock ratio (a measure of market tightness) increased slightly to 25, supporting the argument that the imbalance in stock levels is still providing support for prices.

The regional picture highlights the north/south divide developing in the English market. The sales-to-stock ratio is highest in London and the South East and lowest in the North. Correspondingly, the net balance of surveyors reporting price rises in London and the South East are 31% and 2% respectively, whereas 23% more surveyors in the north are still reporting prices falling rather than rising.

Commenting, RICS spokesperson Jeremy Leaf said: "Although demand for property is continuing to rebound, it still remains low from a historical perspective. Crucially it is the lack of supply that is helping to underpin prices at the present time.

"Significantly, the more positive news on prices – at least in some parts of the country – may prompt more properties to come on to the market. If mortgage availability remains insufficient to meet the increase in buyer demand, then it is possible that prices may slip back again especially if unemployment continues to rise and mortgage rates increase.

"The pattern emerging in the regions is very interesting, with more chartered surveyors in London, the South-East and the South West reporting rising prices, whilst those in the North are clearly experiencing a very different marketplace."

Source: RICS

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