The UK housing market could see what first looks like a V-shaped recovery only for it to be quickly flattened out, according to RICS.
Property demand has increased significantly in recent weeks as buyers return to the market, but this short-lived bounce will not be enough to stop house prices falling, the property firm has warned.
Anecdotal evidence suggests that a number of property investors are looking to take advantage of Rishi Sunak’s stamp duty holiday by expanding their portfolios, but respondents to the latest RICS survey suggest that this impetus will not continue beyond the short-term as wider government support measures begin to be phased out later in the year.
As new buyers flooded into the market, a headline net balance of +75% of survey participants noted an increase over the month.
Similarly, new instructions being listed onto the sales market rose sharply, evidenced by a net balance of +59% of respondents reporting a rise.
Alongside this, a net balance of +57% of respondents nationally saw a rise in agreed sales in July. This is again indicative of a strong pick-up in transaction levels after the hefty declines reported a few months ago. This was mirrored across all parts of the UK.
Looking ahead, continued growth in sales at the headline level over the next three months is expected, with a net balance of +26% of contributors anticipating an increase. However, further out, 12-month sales projections remain negative, suggesting that more people will stay put in their existing homes or in the case of many would-be first-time buyers, seek to rent instead.
Indeed, a net balance of -10% of respondents foresee sales tailing off over the year ahead, with concerns about the prospects for the UK economy and the impact this will have on employment as the furlough scheme expires in October.
As far as property prices are concerned, a net balance of +12% of respondents reported an increase in house prices during July, a noticeable turnaround on the reading of -13% in June. Prices rose in virtually all regions/countries covered, with the exception of London, which represents the sole exception, where a net balance of -10% of respondents cited a decline (albeit this is significantly less negative than the reading -54% posted beforehand).
As to the future, at the national level, a net balance of +8% of contributors expect prices to increase over the next twelve months. As such, this latest reading is consistent with a flat to marginally positive outlook for house prices in the year ahead.
Simon Rubinsohn, RICS chief economist, said: “The strong impetus provided to the housing market is evident both in the results of the RICS survey and many of the anecdotal comments from respondents. However, it is interesting that there remains rather more caution about the medium term outlook with the macro environment, job losses and the ending or tapering of government support measures for the sector expected to take their toll. Significantly, some contributors are now even referencing the possibility of a boom followed by a bust.”