Surveyors report sharpest fall on record of new homes coming on market
The supply of homes coming on the market is plummeting at the sharpest rate on surveyors' records as the EU referendum vote helps to slam the brakes on property prices, buyer interest and sales.
Interest from potential buyers is fading at the fastest rate since 2008, while house price falls are increasingly taking a grip in London, according to findings from the Royal Institution of Chartered Surveyors (RICS).
It said surveyors across the whole of the UK were generally expecting prices to dip in the coming three months, with 27% more surveyors expecting to see prices fall rather than rise in the near term.
Rics' report, based on data collected after the EU referendum result, found that a net balance of 45% more surveyors saw a fall rather than an increase in new homes coming on the market during June. This is the sharpest fall Rics has ever recorded, since it started asking this question in 1998.
Meanwhile, a balance of 36% of surveyors reported new buyer enquiries falling rather than increasing - the most negative reading since mid-2008.
Rics said the "erosion" of buyer confidence had led to a significant slowdown in house price growth.
Expectations for house price growth in the coming year had also been reined back significantly in the wake of the vote to leave the EU - with the number of surveyors who expected prices to increase equalling those who expected prices to fall in the coming 12 months.
London and East Anglia were the only areas of the UK where surveyors expected prices to be lower in the next 12 months.
But in five years' time, surveyors still expected house prices to be around 14% higher than they were now.
Prices were still generally showing some growth in June, with 16% more surveyors reporting prices rising rather than falling over the previous three months - although this is well down on the average reading of 50% seen since the start of 2016.
London remains the only part of the UK where more surveyors are seeing prices fall rather than rise. The numbers of surveyors in London reporting falling prices slipped deeper into negative territory in June, with 46% of surveyors in the capital reporting falls rather than rises. Price falls were particularly concentrated in central London.
Looking at predictions for sales, a balance of 12% of surveyors now expect transactions to fall rather than rise in the year to come. This is the first time in four years that these sales expectations have turned negative.
Sales have already started dropping off, with a balance of 35% of surveyors reporting a fall in sales in June compared with May. This is the third fall in monthly activity in a row.
The referendum is not the only factor behind the dip in activity. A stamp duty hike imposed on April 1 for buy-to-let investors has also disrupted the market.
There were signs of investors rushing to push house sales through earlier in 2016 to beat the deadline. These sales might otherwise have taken place later in the year.
The Council of Mortgage Lenders (CML) has reported that buy-to-let house purchase lending in May was running at less than half the levels seen before the tax changes.
A Bank of England report released this week said in discussions after the referendum, lenders expected to see demand for mortgages falling, although there was not expected to be much of a change in mortgage availability or mortgage rates.
Simon Rubinsohn, chief economist at Rics, said: "Big events such as elections typically do unsettle markets so it is no surprise that the EU referendum has been associated with a downturn in activity.
"However even without the build up to the vote and subsequent decision in favour of Brexit, it is likely that the housing numbers would have slowed during the second quarter of the year, following the rush in many parts of the country from buy to let investors to secure purchases ahead of the tax changes.
"Rics data does suggest that the dip in activity will persist over the coming months but the critical influence looking further ahead is how the economy performs in the wake of the uncertainty triggered by the vote to leave."