Short-term dip in house prices 'caused by referendum uncertainty' forecast


House prices are heading for a short-term dip amid uncertainty over the EU referendum outcome, according to surveyors.

For the first time since 2012, more surveyors expect prices to fall in the next three months than those predicting an increase, the Royal Institution of Chartered Surveyors (Rics) said.

A net balance of 10% more surveyors expect prices to fall in the next three months than those expecting an increase.

But Rics said this was unlikely to signal the start of a more affordable housing market - and in the longer term, with the supply of homes still tight, prices were predicted to swing back upwards.

A net balance of 54% of surveyors expect prices to be higher in 12 months' time. Surveyors expect to see annual house price increases of 4.1% for the next five years typically - while rents are predicted to increase at a faster rate of 4.7% annually over the same period.

Rics found demand from buyers fell back for the second month in a row in May. Buyer demand shrank at the fastest rate since 2008, with a balance of 33% of surveyors reporting falls in new buyer enquiries.

The supply of properties available also decreased sharply, with 30% of surveyors reporting supply falling rather than rising. Rics said this represented the most widespread decline since the survey started in April 1999. Wales was the only part of the UK in May to see a modest increase in properties coming on the market.

The report said surveyors put forward several suggestions for the waning appetite from buyers, "with uncertainty over the upcoming referendum on the UK's membership of the EU by far the most prevalent suggestion".

Surveyors also reported a lack of demand from buy-to-let investors, following a three percentage point stamp duty increase for this sector from April 1. Many investors brought forward property purchases to beat the deadline, which might otherwise have taken place later in 2016.

Rics said the expected short-term price dip at a national level was being "heavily influenced" by some south eastern parts of the UK, with expectations there significantly more negative than elsewhere.

In London and East Anglia, large net balances of 43% and 33% of surveyors respectively expect prices to fall in the next three months.

Surveyors in some areas - including Wales, Scotland, Northern Ireland and the Midlands, still expect to see prices creeping up in the coming three months - although price inflation in these places is still expected to be much weaker than it was previously. 

House prices in central London are already falling, with 35% more surveyors reporting that prices had fallen rather than risen over the past month, while prices climbed modestly across the rest of the UK.

Meanwhile, 4% of property professionals expect to see a drop off in sales rather than an increase in the coming quarter. But several said the outlook would hinge on the referendum on June 23, the report said.

The property sales outlook for the next 12 months remains more positive, with a net balance of 29% of surveyors expecting a pick up.

Simon Rubinsohn, chief economist at Rics, said: "Sadly, for the many young people looking to enter the property market, it is unlikely that we are seeing the emergence of a more affordable market.

"Instead, it appears to me that what we are looking at is a short-term drop caused by the uncertainty resulting from the forthcoming EU referendum coupled by a slowdown following the rush to get into the market ahead of the tax change on the purchase of investment properties.

"Certainly, that's the story we are hearing from our members. There is not at this point a sense that a fundamental shift is taking place in the market."