SW house prices set to falter

Near term expectations for South West house prices turned slightly negative for the first time since 2013 according to the latest Royal Institution of Chartered Surveyors (RICS) Residential Market Survey.

The survey shows house prices in central London falling while prices are continuing to climb modestly across the rest of the UK. In the South West 25% more respondents said prices had risen rather than fallen over the last three months. This figure has fallen in each month since February when 73% more respondents reported a rise rather than a fall in prices.

However, price momentum looks set to ease further in the near term with 7% more respondents predicting that prices would fall rather than rise over the coming three months. This is the first time that a fall in prices has been predicted since 2013.

RICS Chief Economist, Simon Rubinsohn, said, “Sadly, for the many young people looking to enter the property market, it is unlikely that we are seeing the emergence of a more affordable market. Instead, it appears to me that we are looking at a short term drop caused by the uncertainty resulting from the forthcoming EU Referendum coupled with a slowdown following the rush to get into the market ahead of the tax change on the purchase of investment properties. Certainly, that’s the story we are hearing from our members. There is not at this point a sense that a fundamental shift is taking place in the market.”

Buyer demand fell in the South West for the second consecutive month and at the fastest pace since mid-2014 with 43% more property professionals saying that demand decreased last month rather than increased.

The number of agreed sales also fell with a net balance of 18% of respondents reporting a fall rather than a rise in activity. Last month agreed sales remained flat whereas at the beginning of the year 40% more surveyors reported an increase in agreed sales rather than a fall. And over the next three months 6% more respondents expect sales to continue to fall rather than rise.

The survey revealed that in the longer term, while house prices are thought likely to regain momentum, rents look set to outpace them with UK rents predicted to increase by 4.6% on average year-on-year for the next five years compared to house price increases of 4%.

However, in the short term only 7% more respondents expected rents to rise rather than fall. New landlord instructions remained flat while tenant demand continued to rise with 38% more respondents seeing a rise in demand rather than a fall.

RICS South West spokesman, Roger Punch,  said, "Predictably, until the referendum is over we will see a degree of stagnation and it is possible that we will see a flat period for a while afterwards. However, underlying demand is unlikely to be supported by adequate fresh supply, meaning that market price levels will continue to grow steadily, although at varying rates across the region."