Nationwide price increases driven by stock shortages

RICS UK Residential Market Survey, April 2015

General Election uncertainty sees new instructions fall and house prices rise in all parts of the UK

House prices were driven up again in April as the data showed the third consecutive monthly decline in supply with new instructions falling at their fastest rate since May 2009, according to the latest RICS UK Residential Market Survey.

While 33% more surveyors saw prices rise in April, the highest reading since last summer, new instructions slipped to a net balance of -21% – the eighth consecutive drop in the last nine months. Moreover, the flow of second hand stock onto the market dropped in most parts of the country.

Alongside this, for the first time since August 2014, respondents’ reported an increase in prices in every area of the UK,  the reason for this being the shift in tone in the London market, where 28% more respondents saw prices in the capital rise (compared with 6% more surveyors in March who saw house prices fall).

Near term member expectations for prices and sales continue to point to relatively modest gains, but 72% of members expect prices to rise over the course of the next twelve months.  Meanwhile, in the lettings sector, there is no slowing in the growth of tenant demand, which is helping to underpin higher expectations for rents.

Although anecdotal evidence suggests that these trends may have in part been a result of uncertainty ahead of the election, they are also reflective of deeper underlying problems. The downward trend in owner-occupation rates across the country is a visible sign that affordability constraints bite ever deeper, as does the squeeze on household budgets from higher rents.

Simon Rubinsohn, RICS Chief Economist, said: “It is conceivable that the decisive outcome to the election could encourage a pick-up in instructions to agents and ease some of the recent upward pressure on house prices, but it is doubtful that this will be substantive enough to provide anything more than temporary relief. Alongside an increased flow of second hand stock, it is absolutely critical that the new government focuses on measures to boost the flow of new build.”

Jeremy Blackburn, Head of Policy, said: “The affordability and availability of homes in the UK is now a national emergency and addressing this crisis must be the priority for the new government. The last time we were building 300,000 homes was in 1963 under Harold Macmillan’s Conservative government, which utilised both public and private building.

We need a coherent and coordinated house building strategy across all tenures. This should include measures that will kick-start a supply-side revolution, such as mapping brownfield, addressing planning restrictions and creating a housing observatory to assess the underlying economic and social drivers of housing and provide the impetus for solutions.

Introducing demand-side measures, such as extending ‘Right to Buy’, will not see the Conservatives deliver on their promise of 1m homes by 2020.”