Fertile ground for further house price growth
RICS released its latest UK Residential Market Survey for April 2022 today
What they said
The stock of homes for sale remains scarce
New buyer demand continues to rise
House price growth remains firm across the UK
RICS reported today that new buyer enquiries increased for the eighth successive month. Demand continues to outweigh supply, which in turn will underpin house prices and provide fertile ground for continued house price growth.
On the whole, estate agents expect to see an increase in the number of housing transactions over the next three months (a net positive balance of 12%), although, on a 12-month view, there is a slightly negative net balance (-4%) as we lap the tough comparables of the COVID-19 stamp duty holiday period.
New stock coming on to the market remains scarce, overall agents reported a slightly lower number of homes being listed for sale in April 2022 than in March 2022
With the continued imbalance between supply and demand, the latter outweighing the former, house prices continue to rise, a net balance of +80% of agents reported increasing house prices in April, up from +74% in March. Overall a net balance of +62% of agents expect house prices to continue to rise over the next 12 months.
RICS also reported that lettings demand continues to outweigh supply, implying that rents are also likely to rise in the coming months.
Challenges or opportunities ahead?
We have been surprised by the length and strength of house price growth since the start of the pandemic, and that price momentum has been maintained following the stamp duty holiday.
Challenges for house prices
Many are starting to call the top of the market, and this week the Daily Mail reported on the growing trend of down valuations (where a lender does not agree with the purchase price of a home and therefore reduces the amount of money they are willing to lend). This could signal a pause in house price growth or a reversal of some of the recent house price gains and house prices may start to fall.
Opportunities for house prices
However, with demand for homes (Both to buy and to rent) outstripping supply prices continue to rise and as prices rise we may see more homeowners (and landlords) tempted to offer their homes for sale. An increase in supply would be good news for all involved in the housing market. An increase in supply would temper house price growth, which would be a good thing in our view, better a tempering than a crash.