Buyers are starting to return to the UK housing market but have little choice of new properties, according to the September 2021 RICS Residential Market Survey.

Results show a steadier trend in buyer demand in September, after a brief pull-back that followed the wave of activity around the Stamp Duty holiday. This more stable trend in buyers sees expectations for sales in the coming three months gaining momentum, with 11% more respondents this month anticipating an increase in sales expectations, up from +6% (net balance) in August. The 12-month sales expectations point to a stable trend in sales over the year to come.  

The September survey also highlights a continued lack of supply which will have further impact on the market as 35% (net balance) of respondents reported a further fall in instructions this September. In another indication of constrained supply, respondents report that the number of appraisals undertaken during this September was below the rate seen twelve months earlier.   Alongside this, for the third successive month newly agreed sales dipped, with 15% (net balance) of respondents reporting a decline.

The lack of available stock is creating competition amongst buyers, which is creating upward pressure on prices. In September, the national reading for house prices posted a net balance of +68%. Whilst still pointing to strong house price growth, this has eased since May when +82% more respondents reported that house prices were growing. The three-month house price expectations remain positive with +21% of contributors anticipating prices to rise, and further ahead, over two thirds of respondents (70%) anticipate prices will continue to grow over the coming twelve-months.

The lettings market sees little difference to previous months, as tenant demand continues to outstrip supply with +62% of respondents reporting a rise in the number of people looking for a rental property in September and -21% reported a decline in new landlord instructions, continuing a trend seen since July 2020. The imbalance is predicted to drive rents higher. At the national level, the near-term rental expectations net balance stands at +55%, and for the year ahead, respondents’ projections point to headline rental growth of just over 3%.

Simon Rubinsohn, RICS chief economist, commented: “The imbalance between demand and supply remains the most striking theme in the latest RICS Residential Market Survey. And feedback from members provides little reason to believe this issue will be resolved anytime soon. This is very clearly reflected in the forward-looking metrics, with both price and rent expectations close to series highs pointing to put greater pressure on affordability at a time when money markets are sensing interest rate increases coming sooner rather than later.

“Delivering higher numbers of new homes is part of the answer but it is critical they are built in the areas where the shortfall is most visible. It is also vital that the tenure mix of the supply pipeline is broadly based helping to address the challenges both in the private rental market and in social housing.”

Market comment - sales

In the North East, Chris Stonock at Your Move in Co Durham, said: “Available stock continues to decline and with it buyer choice. Frenetic interest has subsided but there are still enough buyers around to make it a sellers’ market. There was no substantial uplift in new listings in September, which is not a good sign given the very low stock levels.”

In the West Midlands, John Andrews at Doolittle & Dalley in Brignorth, stated: “September saw the rush for completions to catch the stamp duty holiday. Since then, there has still been good levels of enquiries but less panic buying, despite prices still rising slowly. The autumn market is expected to be quieter as other economic factors become apparent, leading to a slowdown in the housing market.”

Market comment – lettings

In Yorkshire & the Humber, Jonathan Myers at Quick & Clarke in Beverley, commented: “Government measures to tax private landlords further have reduced the number of rental units, therefore increasing rents due to supply and demand. The restriction on tenant’s fees and higher deposits for pets etc. has also increased rents to pay in advance for landlords’ potential costs. This means that the tenants suffer more.”

In East Anglia, David Boyden at Boydens in Colchester, said: “It was another fantastic month for deals and a consistent number of landlords are coming to market to let. A small proportion of landlords are still exiting the market but these properties are being snapped up by new investors.”

In London, William Delaney at Lawrence Ward & Co in the City, stated: “Rental demand continues to be healthy, and we are seeing a recovery in rents though not yet to pre-pandemic levels. Rent reviews in this quarter are coming as a surprise to some tenants who agreed a rent in the latter half of 2020.”