House price growth falters as demand wanes in July, says RICS

Interest from new house buyers waned in July as sales fell, according to research by the surveying industry, pushing monthly UK house price growth to its slowest in three years and falls in London.

The monthly residential market survey from the Royal Institute for Chartered Surveyors (Rics) found interest from new buyers continued to fall in July as demand fell for a four consecutive months to a net balance of 27%, with sales and enquiries dropping but expected to stabilise in the coming months.

UK house price growth in July fell to the lowest survey reading in three years, as just 5% of respondents saw a rise rather than a fall in prices, as the latest policy measures announced by the Bank of England last week lower the cost of mortgage finance in the wake of the concerns raised by the Brexit vote.

Rics' London price indicator fell 33%, which is broadly consistent with an outright drop in prices in the capital.

Price expectations were negative for the third month in succession as 12% more respondents predicted a decline prices over the next three months.

Waning demand is the key, as stock levels have reached record lows in parts of the country as new instructions declined significantly. Around 34% of respondents reported a fall in transaction with the monthly pace of decline in June and July at the fastest rate since 2008.

On the longer term, 12-month indicators are up in July from June and show both sales and price expectations at the twelve month time horizon returning to positive territory, albeit relatively modestly so.

This rebound in the key twelve month indicators suggests "confidence remains more resilient than might have been anticipated', said chief economist, Simon Rubinsohn, who also called for action from the government.

“Critically, it is hard to escape the stark message regarding supply that is evident in the latest set of results with RICS data showing inventories on agents books around historic lows on average. This is a long running story that may have been exacerbated by recent events but clearly needs urgent action from the new government.”

Respondents to the survey said that tax surcharge on investment purchases and the Brexit result from the referendum contributed to the current mood, but conditions varied between members as a large portion said after an initial wobble from the referendum activity has returned to normal and others said that Brexit only had a modest effect.

Ana Thaker, market economist at PhillipCapital UK, said the housing market showed a declining sector predicated on Brexit uncertainty and the trend could continue as the country struggles with the fallout. The housing market is likely to be a gauge of consumer sentiment following the rapid rise over the last two years. She also warned that the government should act swiftly.

Thaker said: “A weaker currency is likely to fuel demand from abroad but the domestic market looks set to suffer which will permeate other crucial areas of the economy. The government should look to act swiftly to stem any unrest in these sectors so as not to cause panic amongst consumers.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “July’s RICS survey indicates that most surveyors still expect prices to fall in the near-term, although the balance for the next three months did rise to -12%, from -26% in June.

“A majority of 13% of surveyors expect prices to rise over the next year. Much, however, will depend on the severity of the labour market downturn and the trajectory of consumer confidence. The deterioration in surveys of firms’ employment intentions and the looming inflation-driven squeeze on real earnings signal a high risk that prices could fall for more than just a few months.”