Housing market picks up amid post-election optimism - RICS

The housing market showed signs of revival in January as improved sentiment prompted an increase in sales activity, the latest RICS survey showed.

House prices rose for the first time since July 2018 as activity picked up in London and the South East, the Royal Institution of Chartered Surveyors said. Buyer enquiries, agreed sales and new instructions at estate agents all increased over the month.

The number of homes listed for sale also rose as a net balance of +19% of respondents reported a rise - up from +11% in December. Respondents said they expected the renewed optimism to continue, with sales forecast to rise across the UK in the short term and the coming year.

The UK's housing market has been in the doldrums in the past few years as worries over Brexit, political turmoil and the wider economy have weighed on market sentiment. London and the South East had fared worst because of the region's high prices, stamp duty changes and exposure to financial services.

The pick-up in housing activity reflects a wider revival in short-term economic confidence after the Conservatives' clear election victory in December. The result established some political certainty and ended parliamentary deadlock over Brexit, enabling the UK to leave the European Union at the end of January.

Simon Rubinsohn, RICS's chief economist, said: "The latest survey results point to a continued improvement in market sentiment over the month, building on a noticeable pick-up in the immediate aftermath of the general election … It remains to be seen how long this newfound market momentum is sustained for, and political uncertainty may resurface towards the end of the year. But, at this point in time, contributors are optimistic regarding the outlook for activity over the next twelve months."

Signs of economic improvement caused the Bank of England to shelve an expected cut in interest rates at its recent monetary policy meeting. But the BoE has said it is monitoring the economy closely with further Brexit-related ructions possible as the UK seeks to negotiate a trade deal with the EU in tough negotiations.

RICS said average stock levels at estate agents remained very low at an average of 43 properties per branch. Rubinsohn said the recent rise in new sales instructions was needed to remedy this shortfall.

"We doubt activity and house price growth will be sustained at current levels throughout this year. Some of the heat in the market reflects people who held back from house purchases last year now rushing to complete transactions," Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said.

"Nonetheless, with mortgage rates set to remain very low and year-over-year growth in households’ real disposable incomes on track to pick up this year, the housing market still should be in decent shape at the end of this year."