South East: Residential prices and activity decline as buyers show caution

The South East’s housing market continues to lack momentum in September as demand from new buyers and sales fell once more. Feedback from respondents suggests that the shift in interest rate expectations contributes to buyer caution in a slowing market, according to the September RICS UK Residential Market Survey.

This month, surveyors in the South East reported a decline in both sales and new buyer enquiries. In September, 20% more respondents in the South East noted a fall rather than rise in demand from would-be buyers, extending the run of negative readings into a ninth month. 

Alongside this, 33% more respondents in the region reported a fall in agreed sales rather than a rise which is the poorest monthly reading since June 2016.

London and the South East were at the forefront of the decline in sales nationally, but weakness in transactions was widespread during September. In fact, only Wales and the South West were cited to have seen an increase in sales, while all other parts of the UK saw sales flat.

Looking ahead over the next three months, sales are expected to remain broadly unchanged in the South East, with expectations moderating to -1% (from -20% previously). Likewise, the 12-month outlook is observing the second consecutive month of flat readings.

As sales and new buyers decline, new instructions to sell flattened with 3% more respondents noting a rise rather than a fall. Consequently, average stock levels on estate agents’ books held broadly steady.

Prices continued to decline in the South East in September, with 21% more respondents seeing a fall in prices, continuing a four-month trend of negative readings. Both the South East and London regions continue to display the highest proportion of respondents viewing the market to be overpriced, compared to all other parts of the UK.

Looking ahead to the next three months, sentiment remains subdued with 14% more respondents anticipating a decrease in prices over the short-term.

In the lettings market, interest from prospective tenants fell further during September (non-seasonally adjusted), with 19% more respondents noting a fall, rather than a rise, in tenant demand. Alongside this, Landlord instructions also fell across the South East. Consequently, rent expectations edged up with a net balance of +10% of respondents anticipating near-term increasing rents.

Simon Rubinsohn, RICS chief economist, commented: “It was always questionable to talk about the housing market as a single entity but the stark divergence in key readings from the latest RICS survey demonstrates in the clearest possible terms just how important the regional narrative is at the present time. In part, this is a reflection of affordability constraints hitting the higher priced segments of the market. It is perhaps also indicative of a shift in economic momentum in the face of the increasing possibility of the first hike in base rates in over ten years.

“That said, we are continuing to see evidence of shortage of stock both in the new build and second hand market. And despite the announcements at the recent Conservative Party conference, it is hard to envisage this changing any time soon. Against such a backdrop, prices in general are likely to remain elevated and indeed, as the survey indicates, continues to rise over the medium term in most parts of the country.”

David Nesbit, from DM Nesbit & Company in Portsmouth, said: “Some movement following holidays, but the market is drifting. Increases in mortgage rates will affect confidence.”

Tim Green, from Green & Co in South Oxfordshire, said: “The September market has not arrived as hoped and shortage of new instructions and incomplete chains put further strain on otherwise willing home-movers.”