The September 2021 RICS UK Residential Survey has shown a steadier trend in buyer demand coming through, following a brief pull-back in the wake of the rush of activity seen prior to the phasing out of the Stamp Duty holiday.

RICS said this appears to be supporting expectations that sales will stabilise going forward, although a lack of supply remains a key impediment.

At the national level, the new buyer enquiries indicator posted a net balance of zero during September. This
is up from -13% last month and is now indicative of a generally stable demand backdrop in aggregate.

Notwithstanding the steadier demand picture, the volume of newly agreed sales did slip back for a third month in succession, evidenced by a net balance of -15% of respondents citing a decline (compared to -17% previously). When disaggregated, sales activity appears to have greater impetus at present relative to the national averages in the North East of England and Wales, where net balances of +26% and +18% were returned respectively.

Looking ahead, near term sales expectations improved modestly at the headline level, with the latest net balance rising to +11% from +6% beforehand. This would be consistent with a small acceleration in momentum through the rest of 2021. However, RICS said the 12-month sales expectations reading sits in more or less neutral territory, pointing to a largely stable trend in sales over the year to come as whole.

With regards to supply, the recent decline in new listings coming onto the market shows little sign of abating. The September new instructions net balance registered a figure of -35% (compared to -36% last time) and has now been in negative territory in each of the last six months. In another indication of the constrained supply picture, respondents also report that the number of appraisals undertaken during September was below the rate seen twelve months prior, with the net balance slipping to -26% from -10% back in August.

As often highlighted in the comments left by respondents, the lack of stock available on the market is creating competition amongst buyers, thereby sustaining upward pressure on prices. Indeed, the survey’s national gauge of house price growth posted a net balance of +68% in September. Although this has eased somewhat relative to the recent high of +82% seen in May, it remains elevated in a historical context nonetheless. Moreover, all parts of the UK continue to exhibit strong house price inflation, with Northern Ireland, Wales and the West Midlands all seeing exceptionally firm rates according to the latest feedback.

Going forward, near term price expectations remain positive, as a net balance of +21% of contributors anticipate an increase over the coming three months (net balance was +23% in August). For the next 12 months, a balance of +70% of respondents foresee further price growth, with expectations firmly in expansionary territory right across the UK.

In the lettings market, tenant demand continues to rise according to a net balance of +62% of survey participants. This latest reading is in line with those seen over the past four months and remains elevated when placed against the long run average of +19% for this indicator. At the same time, the series on landlord instructions remains very much negative (as it has done in each month since July 2020) returning a net balance of -21%.

The imbalance between robust tenant demand and a scarcity of new rental properties becoming available is seen driving rents higher going forward. At the national level, the near term rental expectations net balance stands at +55%, with growth anticipated across all UK regions/countries. At the 12-month time horizon, respondents’ projections point to headline rental growth of just over 3%. In London, rents are now seen rising by approximately 2% on the same basis, marking a significant turnaround relative to six months ago, when rental projections were in negative territory.

Tomer Aboody, director of property lender MT Finance, said: “The stamp duty holiday may have finally ended but a combination of low interest rates and a lack of stock on the market means house prices continue to rise, now and for the foreseeable. In particular, houses with outside space are doing well, giving buyers room to work from home and the living conditions they need in this post-pandemic world.

“With rents rising as buyers who need to move can’t find available stock, or can’t afford to buy thanks to rising values, this is providing a boost to the rental market. With employers bringing staff back into offices for a day or two a week, this is pushing demand for rental properties near city centres.

“Although there is growing speculation about an interest rate rise, this is still unlikely in the short term. If this is the case, and stock levels remain low, property prices will continue to rise. Stamp duty is possibly the only lever left to pull in order to increase stock by reducing or removing it for downsizers.”