UK house price inflation is set for a slowdown over the coming months as the impact of new stamp duty changes, the EU referendum and the forthcoming devolved elections combine to create a climate of uncertainty in the country’s housing market, the latest survey from the Royal Institution of Chartered Surveyors (RICS) has revealed.
These factors have been most strongly felt in central London where 38% more respondents expected to see house prices fall than rise over the next three months. Across the UK, sentiment around house price inflation has also dampened with 17% of respondents (net balance) expecting to see prices rise over the next three months.
However, respondents across the South West remain confident that prices will continue to rise in the near term with 37% more contributors expecting an increase in prices rather than a fall. Furthermore, the longer term outlook is firmly positive with prices in the South West projected to rise by more than 4% each year for the next five years.
Sales expectations in the South West remain upbeat with 18% more surveyors expecting sales to rise rather than fall – little change from last month. However, across the UK after expectations around the number of new house sales peaked following the Chancellor’s Autumn Statement, this trend has reversed with 2% more respondents expecting to see the number of sales fall rather than rise over the coming months.
That said, the South West has seen a significant slowdown in the growth of sales in March following last month’s record rise. Just 6% said that sales had increased rather than decreased. In addition, last month’s record increases in new buyer enquiries and new instructions have also slowed in the South West.
RICS Chief Economist, Simon Rubinsohn, said, “As expected the buy-to-let rush has now run its course and as a natural result the market is starting to slow. But there are other significant factors that are currently weakening short term confidence in the UK property market. Elections inevitably bring with them periods of uncertainty in the market and our figures would suggest that next May’s devolved elections are no exception. Likewise, the EU referendum is likely to be an influencer in terms of the damper outlook for London in particular. However, all indications suggest that whatever the outcome of the forthcoming elections and referendum in the long-term the imbalance between demand and supply will still exert a strong influence on the market with house prices expected to rise by close to 25% over the next five years.”
Survey respondents also cited stamp duty changes, the EU referendum and the forthcoming elections as the main catalysts driving the market slow down.
Ian Perry of Perry Bishop and Chambers, which covers Gloucestershire and Oxfordshire, said, “A very busy period leading up to the stamp duty changes. The Brexit debate may slow the market in the next couple of months.”
David Lewis of Stags estate agents in West Devon and East Cornwall, added, “We had a better than expected start to the year with a good level of transactions but are starting to see concerns relating to a Brexit.”
Matthew Harvey of Tayler and Fletcher, Bourton on the Water, Gloucestershire, said, “Inevitably the key impact has been the stamp duty changes… The Brexit question is high on the agenda and the market is likely to be quieter until it is resolved.”
Despite the increased rates of stamp duty tax now expected to be paid by prospective landlords, rent inflation – while expected to increase – is not predicted to rise any faster than it has in previous months. Although over the next five years, respondents continue to anticipate rents will increase by an average of more than 6% per annum, there is no indication yet that tax increases are being passed on to the tenant.
In the South West 69% of surveyors expected rents to increase rather than decrease over the next three months – the highest percentage expecting increases in the UK.