The Government’s announcement regarding the new Help to Buy (HTB) initiative in the Budget has had an immediate impact on sentiment, according to the latest RICS Residential Market Survey.
All the key indicators show some improvement in April compared with March with the notable exception of the sales to stock ratio which was broadly unchanged.
Significantly, the new buyer enquiries series registered a net balance of +25. This is the seventh positive result in the last eight months but, more importantly, it represents the highest reading since November 2009.
The increased interest in the sales market reflects in part, as we have noted previously, the success of the Funding for Lending Scheme in both bringing down mortgage rates and encouraging banks to lend higher multiples.
However the latest jump in enquiries strongly suggests that the HTB proposition is attracting interest even if the mortgage guarantee element of the product is not due to come into effect until next year.
Alongside the increase in buyers enquiries, the RICS survey also shows that new instructions to agents rose in April albeit at a more modest pace. The more rapid rise in “demand” than ‘supply’ in recent months is consistent with the improving trend that is visible in the headline price balance; the latest reading shows the first positive outturn in this series since June 2010. Meanwhile, although the sales to stock ratio actually slipped very slightly over the month (from 25.2 to 25.2) it remains within a whisker of recent highs and is likely to push upwards as the year progresses given the stronger numbers coming through on agreed sales.
Critically, the forward looking indicators for sales and prices recorded more positive readings at both the three and 12 months horizons. The net balance for price expectations 12 months out jumped from 26 to 34 and arguably even more importantly, the results are now positive in every part of the country with the notable exception of Northern Ireland. This is also reflected in the results of a number of new series that we are tracking. Surveyors responding to the survey suggest that, on average prices are likely to rise by just over 1% over the next 12 months; this compares with expectations of just 0.1% back in December. Predictably, London surveyors are most positive in their expectations.
The new RICS Residential Market Survey also contains monthly updates on the lettings sector (supplementing the quarterly data). The latest readings show that tenant demand remains robust and that it is continuing to outstrip new landlord instructions. The result is that the rental expectations series remains in positive territory with the net balance in the three months to April at 18 compared with 21 in the quarter to January. It is noteworthy that despite the positive reading, respondents to the survey anticipate rents rising by less than 2% over the next year.