UK property market report: house prices 'need to be competitive'

Though the UK property market as a whole is at a six-year low, Northern Ireland and Scotland are enjoying a buoyant market and a Brexit deal should see things improve

Latest research from the Royal Institution of Chartered Surveyors (RICS) shows that house prices across half of the UK’s regions are now either flat or falling, and the finger of blame is pointed firmly at ongoing uncertainty over Brexit.

According to the RICS UK Residential Market Survey for October, in which surveyors are asked to give feedback on the property market, 10% more respondents reported a fall in house prices – the worst result since September 2012.

RICS puts the dampened market down to uncertainty over Brexit, which it says is behind a lack of demand from buyers. However, this isn’t the sole reason the UK property market is down: a shortage of new housing stock combined with affordability issues and a small rise in interest rates are also contributing factors.

What properties are worse hit?

Perhaps unsurprisingly, the regions most affected are London and the South East where house prices appear to have reached a tipping point in terms of what buyers can afford, with the average first-time buyer in London needing an eye-watering deposit of £132,000.

Over recent months we have also seen the affordability issue spiral out to towns and cities on London’s traditional commuter belt though RICS describes it more as a “softening” of the market than a crash.

James Perris MRICS, of London-based De Villiers Chartered Surveyors, said: “The market remains difficult at almost all tiers with pricing needing to be very competitive. A secured Brexit deal will hopefully kick start the market.”

East Anglia, the North East and the South West also recorded negative price balances in the report.

Houses at the top end of the scale have also been hit hard – when it comes to properties offered at over £1m, almost 75% of respondents reported houses selling for under the asking price.

Good news for Northern Ireland and Scotland

While property prices in some parts of the UK are down, other regions are reporting solid growth, with properties in Northern Ireland and Scotland showing the biggest increases.

Kevin MacDonald MRICS, of Inverness-based Graham+ Sibbald, said: “Despite October being the traditional start to the end of year slow-down when sellers resist coming forward, market activity in Inverness and surrounds remains strong and continues to outperform that from the same time last year.”

In addition, at the lower end of the scale, properties offered at £500,000 or below are mostly selling for at least the asking price across the UK.

Simon Rubinsohn, chief economist at RICS, says: “Although the tone of much of the newsflow surrounding the housing market remains downbeat, this continues to disproportionately reflect developments in the south and east of England with the picture remaining rather more resilient in many other parts of the country.”

What does the future hold?

RICS says respondents remain doubtful that momentum will pick-up massively over the coming months and indeed the outlook for the coming year is broadly flat, though there is some hope that there will be a slight decrease in the negative sales figures.

If the situation does improve, there’s a good chance it will be driven by markets outside London and the South East and will also depend very much on the affordability of first-time homes and on how much housing stock is available.

In addition, many respondents believe that when a Brexit deal is finally agreed, the UK housing market will grow again.

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