South East: Residential property demand increases with improved availability of mortgage finance
New buyer demand continued to increase in the South East in September supported by a modest improvement in the availability of mortgage finance, according to the latest RICS UK Residential Market Survey.
Demand increased for the second consecutive month in the region, with 12% more chartered surveyors seeing a rise in buyer enquiries in September. Meanwhile, new instructions to sell continued to fall – albeit at a slower pace.
The ongoing lack of new instructions and the resulting limited stock on agents’ books continue to be an issue for the sustainability of the market. Indeed, the number of new instructions in the South East has now fallen in 19 of the last 24 months.
Significantly, 40% of respondents across the UK feel the biggest factor behind the negative trend in new instructions is the lack of stock already for sale which is deterring would-be movers as they struggle to find a suitable property to move on to. The next most cited influence was economic uncertainty, followed by stretched affordability.
As a result of the persistent supply-demand imbalance, prices continue to rise strongly in the region with 47% more chartered surveyors seeing an increase in prices in the South East in the past three months and a net balance of 37% more respondents expect further price growth in the region over the next three months. This trend is likely to be reflected in key house price indices over coming months and into the first half of 2016.
Across the UK as a whole, activity is picking up with agreed sales rising at the quickest pace since May 2014, with 14% more chartered surveyors seeing a rise. This is a 16-month high and the fifth consecutive month that sales have increased. The North, East Anglia, and Scotland posted the sharpest rises in activity over the month with the East Midlands the only region to see a material drop in sales albeit following an increase in the region in August.
In contrast to the national picture, sales in the South East have remained more or less unchanged over the past two months and have yet to see any real growth since December 2014. Nonetheless, going forward, surveyors expect the recent increase in buyer demand to begin to filter through into a pick up in activity over the next three months.
The pattern being seen by chartered surveyors echoes recent lending data including that highlighted by the Bank of England, showing mortgage approvals at an 18-month high and up 12% compared to a year ago. As the availability of mortgage finance appears to be improving, the average ‘perceived’ LTV ratio captured by respondents to the RICS survey edged up to 79.3% with first-time buyers seeing credit conditions relax most noticeably over the month.
In the lettings market, tenant demand increased in the region continuing the pattern seen by respondents since December 2014, and while new landlord instructions increased slightly for the third month in a row, they were still significantly outstripped by tenant demand. Over the next 12 months, chartered surveyors are forecasting rents to rise by 3.3% in the South East.