RICS UK says the Government needs to intervene with medium and long-term measures both in the economy and the housing market including a stamp duty holiday.
In its March 2020 Residential Market Survey, RICS highlights that after three successive months of increasing buyer enquiries, a net balance of -74% of UK respondents reported a fall in buyer demand. This is a sharp drop from +17% previously.
March also saw newly agreed sales decrease across all parts of the UK with 69% more respondents reporting a fall – down from 19% reporting a rise in February.
Future outlook
Looking ahead, sales expectations for the next three months have also turned deeply negative following the lockdown measures, with a net balance of -92% of respondents. This is the lowest reading since sales expectations were first recorded in the RICS Residential Market Survey.
Respondents were slightly less negative about the next 12 month, although 42% expect sales to fall further rather than rise.
New homes coming onto the market dropped sharply over the past month, with a net balance of -72% of respondents reporting a fall. As a result of this, the average amount of properties on estate agents’ books are at a record low of 40 properties per branch.
House prices
A net balance of +11% participants reported growth in house prices March. Northern Ireland, Scotland and the South West all recorded the strongest growth in prices.
However, near term price expectations sunk from a figure of +21% net balance in February to -82% in March, whilst -38% of survey participants expect a further fall over the next 12 months. This is down from a reading of +71% in February, an indication of just how much sentiment has changed over a month. However, prices for the next give years remain resilient.
Lettings market
March has seen new landlord instructions fall with -32% more respondents reporting a decline. Tenant demand across the UK flatlined as the virus had a significant impact on near-term rent expectations which slipped into negative territory for the first time since the financial crash.
The impact of COVID-19 will have a ripple effect on the housing market for the remainder of the year
Comments
Simon Rubinsohn, RICS chief economist, commented: “The results of the latest RICS survey capture the period during which the economy moved into lockdown so show a somewhat mixed picture. But critically, the key forward looking indicators clearly reflect the emergency measures in place.
“The fact that responses are negative not just at the three, but also the twelve month time horizon, is significant in suggesting that the legacy of Covid-19 could be such that any return to what might be described as ‘normality’ in the economy will take time and households will remain cautious for a while.
“Of course, the primary focus of government is at this stage the health of the nation and defeating coronavirus and it may be a little premature to be planning for the economic recovery.
“However, the feedback from the survey does imply that further government interventions both in the wider economy and more specifically in the housing market may be necessary to aid this process supporting businesses and people back into work.”
Hew Edgar, RICS head of government relations, added: “While the UK’s health is the priority, our survey feedback suggests that the Government will need to start considering medium and long-term measures that could assist a post-pandemic housing market.
“RICS is not an organisation that would call for a stamp duty holiday on a whim, and indeed our view prior to Covid 19 was that it required a full-scale review.
“As we start to emerge from this crisis, however, it is likely that the finances of potential homebuyers will be under strain, and the burden of stamp duty could put buyers off.
“For those who can afford to move they may lack confidence in the market, adding to the slow down. A stamp duty holiday could be one of the ways to reactivate the housing market quickly as a short term measure.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “The RICS survey has proved yet again to be a reliable indicator of housing market trends – and unfortunately so, on this occasion.
“It confirms what we are seeing on the ground – demand to buy has been falling off a cliff, not least because physical viewings and surveys cannot be arranged despite the growth in virtual tours.
“Nevertheless, interest in property remains strong, evidenced by active portal browsing and enquiries whereas nearly all of our sales which were at an advanced stage prior to lockdown proceeded to completion with several more in the pipeline.
“Interest in lettings has been particularly healthy too leading us to believe the bounce back will be sustainable provided restrictions are eased fairly soon and damage to the economy is relatively limited.”
