In their May 2016 UK Residential Market Survey, the Royal Institution of Chartered Surveyors (RICS) has predicted that house prices will experience a short-term drop in the coming months.
In summary, the survey found that:
- House prices in central London are falling
- Confidence in UK market is set to falter
- Demand has dropped by fastest rate since 2008
- Rent will continue to rise
The report shows that demand has contracted for the second consecutive month, with demand from new buyers ‘falling for the fastest rate in 8 years’ and house prices across the UK showing ‘modest growth, while central London shows a price drop.’
London and East Anglia are expected to be the worst hit in the coming months.
What are the causes of this decline?
Comments from RICS contributors identify several potential causes for the decline, including uncertainty over the upcoming referendum on the UK’s membership of the EU. There is also an absence of demand from buy-to-let investors following an increase in activity prior to changes in stamp duty in April 2016.
UK housing market: the long-term outlook
Unfortunately for the younger, first-time buyer set, this temporary drop in house prices is unlikely to bring forth the opportunity of a more affordable housing market; instead, the survey predicts that in the long-term the market will return to previous form and house prices will continue to increase year-on-year at a rate of 4.1% for the next five years. And for those renting in order to save for a deposit on their first house? They may be even more disheartened to learn that their rent is likely to increase at the much quicker rate of 4.7% over the same period.