UK property market slows in July

Despite the more positive outlook in June, growth in the property market slowed down slightly in July, according to the latest survey from RICS

Despite the more positive outlook posted in June, inroads were eroded slightly in July concerning positive near term growth in the property market.

Although buyer demand remained in positive territory in July with a net balance of +8%, this has slipped back from +10% recorded in June, according to the most recent UK Residential Survey from RICS.

Despite the upturn in buyer demand, agreed sales have deteriorated and edged back into a negative net reading in July. June’s net reading of +3% for newly agreed sales suggested a robust market coping with a difficult Brexit situation. However, July’s figures indicate that increased buyer demand is not necessarily translating into new sales with a net reading of -6%.

Contributors also perceived near term sales expectations with pessimism as the +6% reading in June was overshadowed by a negative -2% net balance in July. This pessimism is also permeating and creeping into the long term outlook as the 12 month outlook now only garners a net balance of +12%. This positive sentiment has more than halved since the +28% recorded in June.

House price expectations in the near and long term also fell in July. Contributors feel that house prices over the next three months will struggle to grow. The national net balance in July fell from the neutral position of zero to -12%. The long term outlook continues to cling to a positive reading of +9% but has tumbled from the more optimistic reading of +25% in June.

RICS Chief Economist, Simon Rubinsohn commented that the latest RICS results will provide little comfort for the market with all the key indicators pretty much flatlining. Indeed, the forward looking metrics on prices and sales also seem to be losing momentum as concerns, clearly voiced in the anecdotal feedback, both about Brexit and political uncertainty heighten.

Some support may be provided by an easing in the cost of money which could feed through into lower mortgage finance costs, but this may be insufficient to provide a spur to lift activity given the clouds hanging over the economy, Rubinsohn said.

He said that meanwhile, the lettings market data continues to send a very strong message that institutions need to upscale their build to rent pipeline to address the shortfall resulting from the decline in appetite from buy to let investors. It is significant that the near-term rental expectations indicator has climbed to a three-year high.