RICS Reports Higher House Prices, Muted Activity

The headline price measure from the latest survey from the Royal Institution for Chartered Surveyors (RICS) rose to +12 in August from July’s +5.

That indicates that 12% more responding surveyors have reported an increase in house prices than those who said prices fell during the month.

However, while price growth has accelerated, market activity remained relatively slow. Average stock levels for sale fell for a third straight month in August and are close to the record low balance posted in December 2015, the RICS said. Meanwhile, new buyer inquiries continued to fall, albeit it a slower pace than in July.

“A key factor in supporting the rising prices is the continued shortage of stock for sale,” the RICS said. “This looks set to continue as new instructions declined once more during August.”

Slightly more encouraging was news that property sales stabilised in August, after plummeting a month earlier. However, while price growth may have been achieved on a national level, for London that definitely isn’t the case. “In London, the price net balance remained in negative territory for a sixth consecutive month,” the RICS said.

30% more surveyors reported declines in prices for London property than those who said prices rose. This detail highlights the impact the EU referendum result is having on the capital, with investors less willing to pay premium prices amid the ongoing uncertainty.

While RICS surveyors have noticed an increase in prices, the latest survey from UK lender Halifax is less sanguine.

The lender’s monthly house price index calculated the average house price in the UK was 0.2% lower in August than in July. And, the annual and three monthly measures both showed a slower pace of growth than a month earlier; house prices were 6.9% higher than a year ago, a sharp decline from the 8.4% annual increase reported in July. In the three-months to August, meanwhile, house prices grew 0.7%, less than half the 1.5% gain reported in the three months to July. Both those measures indicated the slowest pace of house price growth for over a year.

The reasons behind that broader slowdown in house price growth was due to the ongoing and still widening discrepancy between house prices and earnings growth, the Halifax said.

“The slowdown in the rate of house price growth is consistent with the forecast that we made at the end of 2015,” Halifax housing market economist Martin Ellis said. “Increasing difficulties in purchasing a home as house prices continued to increase more quickly than earnings were expected to constrain demand, curbing house price growth.”

The Halifax forecasts house price growth of between 4-6% over the course of 2016.

Looking ahead, it’s likely that any forecasts for house prices in 2017 and beyond will be thin on the ground due to expected high levels of uncertainty surrounding the UK’s economy, jobs and earnings growth and supply and demand of property.

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