SW house prices set to rise by 22 per cent

House prices are expected to rise in the South West by 4 per cent per annum, over the next five years (a cumulative increase of around 22%)

Rising property prices in the Home Counties could be having a knock-on effect in the South West, encouraging urbanites to downsize into the region’s small holdings, says a  local RICS spokesperson. Anecdotally, chartered surveyors in the South West say that small holdings in the region which they couldn’t sell previously have now become very much in demand.

According to a survey published today by the Royal Institution of Chartered Surveyors (RICS),
house prices have risen across all parts of the UK for the third consecutive month. The  RICS UK Residential Market Survey released today found that in  October, 39%  more chartered surveyors saw house prices rise across the South West, compared to a balance of 38% more reporting an increase in September. 

As prices rise in all areas of the UK, East Anglia has become a new “property hot spot” and has consistently seen the fastest rises over the last three months; and 91% more chartered surveyors reported seeing a rise rather than fall in prices in October.  While 25% more chartered surveyors saw prices rise in London over the last three months, only 5% more are expecting a rise (rather than fall) in prices in the capital over the next three months – this is the lowest reading across the UK over this time period.  However, the twelve month view for the capital is still relatively strong.

Contributing to the rise in prices across the country, demand from potential buyers grew across the UK in October with 12% more respondents seeing a rise in buyer interest as opposed to a fall.  Demand continues to considerably outpace supply and the number of new instructions decreased for the ninth month in succession, with 10% more chartered surveyors reporting a fall.  The supply of new stock to the UK market has been in decline since the start of 2015, with the number of new instructions only increasing in one of these months.

Despite the lack of new stock to the market, sales activity is relatively healthy and following a small pick-up in agreed sales in September, activity was hardly changed this month across the UK.  This chimes with HMRC transactions data, which continues to see the number of new instructions declining since the start of 2015, so the number of available properties is continuing to out strip demands.

Roger Punch, residential spokesman for the South West at RICS, commented: “We are continuing to see modest price rises this year in the South West. However, London continues to experience the highest price rises. The greatest problem within the market over some parts of the South West is a lack of stock, which is often causing buyers to compete, resulting in the inevitable climb in achievable prices. The lack of new building is also combining with the shortage caused by would-be sellers staying put through the lack of available alternatives. The “Good Life’ effect, drawing urbanites to ’downshift’ while also benefiting from  a slower-pace of life and a more attractive environment, remains a contributory factor to the prevailing demand levels.”

In the UK lettings market, demand is also continuing to outpace supply in the three months to October*.   This has been the trend nationally for some time, with the growth in demand outstripping that of supply since 2009.  Unsurprisingly, rental expectations remain strong and respondents continue to expect rents to rise over the year ahead. Rental growth is anticipated to accelerate to an average of just around 5% per year over the coming five years at a national level, with similar growth projected in the South West.

Simon Rubinsohn, RICS Chief Economist, commented: “It is hard to get away from the issue of (housing) supply when it comes to the current state of the housing market. The legacy of the drop in new build (properties) following the onset of the global financial crisis is now really hitting home with both the sales and letting markets continuing to show demand outstripping supply on a month-by-month basis.

If the five year projections from RICS members regarding the outlook for both prices and rents is anything to go by, property is set to become even more unaffordable going forward. Making the Government’s focus of boosting the delivery of new homes is absolutely critical.”