Housing supply tide turning
RICS released its latest UK Residential Market Survey for March 2022 today
What they said
New instructions indicator turns positive for the first time in 12 months
Buyer demand continues to increase
House price growth remains firm
It is good news that Agents reported an increase in the supply of homes to the market for the first time in 12 months, in 2022 vendors are putting the 'selling' into the spring selling season. The increase is only a small one, and stock levels remain close to historic lows, but hopefully, the tide is turning with more supply waiting in the wings. If the supply of homes continues to increase it should help alleviate some of the pressure on house prices which continue to rise at pace.
Agents remain positive about the near term outlook for the UK housing market, but are cautious of the macroeconomic headwinds (rising cost of living and increasing interest rates).
Looking at the volume of housing transactions, the near term trend is upwards and agents view the outlook for transactions as stable on a 12-month view. The increase in supply of homes should lead to more housing transactions being completed, although we do not expect 2022 to match the stamp duty holiday fuelled 2021.
Supply shortages continue to underpin prices and a net balance of 74% of agents saw house prices increase over the last month. Looking forward 30% expect further house price growth in the next three months rising to 65% on a 12-month view. When pushed to quantify the size of the rise, agents are predicting house price inflation of 4% per year over the next five years.
In our view, in addition to the supply and demand dynamics at the stock level, if the current level of underlying inflation (Retail Price Index and Consumer Price Index) leads to wage rises, we would expect higher wages to feed through to higher house prices as higher wages allow homebuyers to make higher offers and secure bigger mortgages.