Home buyer demand slows and outlook bleak for London landlords

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housing

Demand for residential property continued in November but at a slower pace, while surveyors expect London rents to fall in the coming months, according to the latest data from RICS.

Sales of homes continued to increase during the month as buyers looked for new homes ahead of the stamp duty cut ending in March.

Demand rose for most of the United Kingdom, but the pace of this growth appears to be losing steam and slowing.

Rental growth expectations remain slightly positive, with most parts of the UK anticipated to see an increase.

However, for the third consecutive month, a net balance of in excess of -60% of respondents expect rents to fall in London over the next three months – making the capital city a clear exception to the rest of the UK.

Nationally a net balance of +27% of surveyors told RICS they experienced an increase in new homebuyer enquiries during the November period – down from +42% in October.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, called the slowing in housing market activity “a temporary seasonal lull rather than the start of any more serious correction”.

“Nearly all previously-agreed sales are proceeding to the usual hurried exchange of contracts before Christmas if possible, and others are planned for soon after so that buyers can take advantage of the stamp duty holiday,” he said, adding he is not seeing prices being renegotiated downwards either.

While +25% of surveyors saw an increase in agreed sales over the month, expectations for the year ahead remain negative.

A net balance of -21% of surveyors foresee weaker sales in 2021. Some are citing rising unemployment and the government’s stamp duty holiday ending in March as reasons for the subdued outlook.

Regionally, agreed sales continued to rise across most areas, with Wales and Northern Ireland seeing particularly strong growth for November.

Peter Williams, CEO of Propp said: “December and January are likely to be exceptionally busy months for surveyors and conveyancers as they move to get everything over the line. For some buyers and investors, a bridging loan will become the right option for those looking to benefit from the stamp duty ‘holiday’ in time.”

Surveyors in the West Midlands, East Midlands and Scotland have started to report a flatter trend in agreed sales, however.

House prices continued to rise, with a net balance of +66% of surveyors reporting an increase in property values.

Price expectations strengthened for the year ahead. A net balance of +20% of surveyors now expect prices to rise over the next twelve months. This is up from +8% in October.

Tenant demand in the lettings market was more stable, with demand from renters little changed over the November period. At the same time, landlord instructions fell according to a net balance of -19% of surveyors.

Tomer Aboody, director of property lender MT Finance, said landlord instructions falling could be the result of investors looking to sell up before the potential hike in capital gains tax which looks likely to come next spring.

“The fall may also be down to would-be tenants or current tenants looking to buy themselves, taking advantage of low mortgage rates and the return of high loan-to-value deals, or it could be that many are staying put, rather than looking to move in an uncertain market,” he said.

Simon Rubinsohn, RICS chief economist, said today’s figures show there is “considerable concern” about the prospect of a sharp slowdown in transaction activity following the end of the first quarter of the coming year.

“A scaling back in direct government support for the market is part of the reason for this but it is being compounded by expectations of material rise in unemployment as redundancy programmes begin to take effect,” he added.