SW house price increases driven by shortages

House prices were driven up again in the South West in April as new instructions declined for the third month, according to the latest RICS UK Residential Market Survey.
While 37% more surveyors saw prices rise in the South West in April, the highest reading since September 2014, new instructions continued to decline as 18% more respondents saw a fall in new instructions over the last month.

As supply issues affect the  market, for the first time since August 2014, respondents’ reported an increase in prices in every area of the UK;  the change coming from members in the London market where 28% more respondents saw prices in the capital rise (compared with 6% more surveyors in March who saw house prices fall).

In the South West prices are expected to continue to increase over the next three months, with 17% more respondents expecting to see further rises and sales expectations are looking positive, with 21% more chartered surveyors expecting an increase in sales over the next three months. Contributing to this, new buyer enquiries are also looking positive with 6% more respondents seeing a rise over the last month.

As near term member expectations for prices and sales continue to point to relatively modest gains in the South West, 50% more respondents expect prices to rise over the next twelve months in the region; and the predicted average percentage price rise for houses in the South West over each of the next five years is 5.5%.

Meanwhile, in the lettings sector, there is no slowing in the growth of tenant demand in the South West, which along with a decline in landlord instructions is helping to underpin higher expectations for rents - 46% of respondents expect a rise in rents in the region over the next three months.

Although anecdotal evidence suggests that these trends may have in part been a result of uncertainty ahead of the election, they are also reflective of deeper underlying problems. The downward trend in owner-occupation rates across the country is a visible sign that affordability constraints bite ever deeper, as does the squeeze on household budgets from higher rents.

Simon Rubinsohn, RICS Chief Economist, said: “It is conceivable that the decisive outcome to the election could encourage a pick-up in instructions to agents and ease some of the recent upward pressure on house prices but it is doubtful that this will be substantive enough to provide anything more than temporary relief. Alongside an increased flow of second hand stock, it is absolutely critical that new government focuses on measures to boost the flow of new build.’’

Jeremy Blackburn, Head of Policy, said: “The affordability and availability of homes in the UK is now a national emergency and addressing this crisis must be the priority for the new government. The last time we were building 300,000 homes was in 1963 under Harold Macmillan’s Conservative government, which utilised both public and private building.

“RICS calls for a coherent and coordinated house building strategy, across all tenures. This should include measures that will kick-start a supply-side revolution, such as mapping brownfield, addressing planning restrictions and creating a housing observatory to assess the underlying economic and social drivers of housing and provide the impetus for solutions.

“Introducing demand-side measures, such as extending ‘Right to Buy’, will not see the Conservatives deliver on their promise of 1m homes by 2020.”