South East: Housing shortages fuelling price and rent increases
Shortages of supply in South East property lettings and sales continue to present a huge challenge for the market, according to the January 2017 RICS UK Residential Market Survey.
In January, new landlord instructions in the lettings market failed to improve for a fourth consecutive quarter across the South East and the rest of the UK. Respondents in the region predicted the issue could worsen over the medium term as they expected landlords to decrease the size of their portfolios over the next three years.
Changes to Stamp Duty in April alongside scheduled cuts to mortgage interest tax relief, were both seen as important factors diminishing the attractiveness of buy-to-let as an investment as 28% more respondents felt that landlords were likely to decrease (rather than increase) the size of their portfolio over the next twelve months in the UK. Over the next three years, 26% more contributors expected landlords to scale-back their portfolios. It is, however, worth noting that the sentiment survey was obtained prior to the latest housing announcements.
During the three months to January, tenant demand for rental properties in the South East continued to increase in the region and, with the continued imbalance between supply and demand, rents are expected to be squeezed higher.
Over the next five years, projections point to rental growth outpacing house price inflation (on average), with rents expected to rise by over 25% cumulatively over the period.
Moving to house purchases in the South East, new buyer enquiries fell during January, with 10% of surveyors reporting a decrease in demand. New instructions having remained flat for the past few months in the region, 1% more chartered surveyors saw a fall in new instructions in January rather than a rise, leaving average stock levels on agent’s books still close to historic lows.
At the same time, sales were flat for the second month in succession with 3% more chartered surveyors seeing a fall in sales over the month.
Sales in the South East were however predicted to improve in the near term with 16% more respondents expecting a rise rather than fall over the next three months in the region. What’s more, the balance of respondents predicting that sales would increase over the year to come reached a one-year high (+37% net balance).
Meanwhile, 14% more respondents saw an increase in prices, rather than a decline in January. What’s more, prices are expected to continue to rise over both the next three and twelve months across the South East.
Chris Gooch, of Carter Jonas in Winchester, commented: “Encouraging start to the year with good levels of new vendor and buyer enquiries so we are hoping Brexit won’t be the distraction it’s expected to be.”
Simon Rubinsohn, RICS chief economist, commented: “The scale of the challenge the government faces as it announces its new approach to housing is clearly demonstrated in the results from our latest survey. Not only are the headline price and rent series pointing to further increases over the course of this year, but more significantly, the medium term view of RICS professionals working up and down the country is that both house prices and rents will over the medium term continue to grow at a faster pace than wages putting even greater pressure on affordability. Whether the measures announced can ease this trend remains to be seen.”
