House prices and sales will likely continue to rise in the aftermath of the Brexit vote, with prices predicted to go up by 3.3% a year over the next five years, according to the latest poll of surveyors.
The Royal Institution of Chartered Surveyors (RICS) found that a higher proportion of surveyors expected sales to rise in the next three months than at any time since February.
And while the number of house sales continued to fall in August, it was at a slower rate than immediately after the EU referendum in June.
Simon Rubinsohn, chief economist at RICS, says: “There are clear signs that the housing market is settling down after the initial surprise of the outcome to the EU referendum.
“Buyer enquiries did dip again in August but only modestly and, more significantly, sales expectations are beginning to edge upwards once again. It is likely the swift response from the Bank of England, both in terms of the lowering of the capital buffer and the cut in interest rates, has played a role in helping to support confidence.”
The poll suggests that both prices and sales are set to rise over both the next three months and 12 months as market activity becomes more stable.
While surveyors reported price increases in most parts of the UK, in London the picture was less positive, with 30% more surveyors reporting a drop in house prices in August, as opposed to a rise.
In general, surveyors are more confident about the future though, with 10% more respondents anticipating house price growth over the next three months rather than prices falling.
Price expectations for the next 12 months are also more positive, with surveyors anticipating modest increases in most parts of the country outside London.
Shortage of housing stock
RICS reports that the volume of agreed house sales stabilised in August, with its agreed sales indicator rising from -32% to zero.
It suggests that the continuing shortage of housing stock has had a knock-on effect on rising prices. Surveyors report a drop in the number of houses on estate agents’ books for the third month in a row, nearing December’s record low.
Surveyors also reported a drop in demand for homes from new buyers although the pace of this decline has eased. A net balance of -7% more chartered surveyors reported a fall in demand in August – up from -25% in July.
‘Could be the beginning of choppy market conditions’
Commenting on the report, Andrew McPhillips, chief economist at Yorkshire Building Society, says: “Activity in the housing market appears to have recovered following uncertainty caused by the EU referendum and the effects of the increase in stamp duty for landlords.
“Although these statistics, along with other favourable economic reports for August, paint a positive picture, they could also be seen as the beginning of the choppy market conditions we are likely to see in the medium term as a result of people’s uncertainty around how post-Brexit UK will look.
“Despite wider economic uncertainty, the main constraint in the housing market is the lack of supply, which will cause house price inflation to grow at a steeper rate in response to increasing levels of demand. In order to make properties more affordable, the UK needs to build more properties and remove other financial barriers for first-time buyers and those moving home in order to accommodate increasing levels of demand in the long term.”