U.K. House Prices Rise as Supply Fails to Match Demand GrowthBy
RICS gauge of home prices increases to seven-month high
Tax changes, supply squeeze will keep future activity subdued
A gauge of U.K. house prices rose to a seven-month high in November as the supply of properties for sale failed to keep up with a moderate increase in demand.
The Royal Institution of Chartered Surveyors said its index rose to 30, the strongest reading since April, and that “supply shortages remain a constraining feature” in the market. Respondents to its monthly survey expect prices across the country to rise in the coming three months, but were less confident about London’s prospects because of tax changes.
Britain’s economy has performed better than expected since the June vote to leave the European Union, and mortgage approvals rose to a seven-month high in October.
Still, the Bank of England warned last month that the outlook is uncertain, and RICS said a slowdown in transaction activity may indicate that the current strength in the housing market may not last. A net 13 percent of surveyors reported a rise in new buyer inquiries last month, near a record low.
“The ongoing supply shortfall, with stock levels around historic lows, and the myriad of tax changes impacting on buyers suggest that any pick-up in activity will be relatively modest,” said Simon Rubinsohn, RICS chief economist. “This is significant not just for the housing market itself but also for the wider economy given how much of consumer spending is tied in with home purchases.”
On the price outlook for the coming year, the national figure was a net balance of 40 expecting growth. There was far less confidence in London, with a reading of 11.
London’s residential property market is in a state of flux, and prices based on some measures have diverged from national trends. RICS’s London data tend to better reflect developments in inner boroughs, where a stamp-duty increase on investors and second-home buyers and worries about Brexit may be having a larger impact.
— With assistance by Mark Evans