UK housing market starting to cool - RICS

The UK’s booming housing market weakened in December, a closely-watched industry survey suggested on Thursday, after a number of key indicators softened.

The December RICS UK Residential Survey reported a net balance of 15% for new buyer enquiries, significantly down on November’s balance of 26% and the fifth consecutive month of moderation.

The flow of new instructions being listed provided a net balance of 7%, while the appraisals balance was also 7%. "In both cases, these indicators have softened over recent months in another sign that momentum has eased of late," the Royal Institution of Chartered Surveyors said.

The UK housing market ground to a halt in March 2020, after the first national lockdown shuttered estate agents and construction sites. But demand soared once restrictions were lifted, fuelled by pent-up demand, lifestyle changes and the stamp duty holiday.

That tax break comes to an end on 31 March 2021, while unemployment is expected to rise as government job retention schemes also finish.

The agreed sales balance was 18% in December, compared with 24% a month previously, while near term sales expectations slipped to -22% from -6% in November, "likely reflecting the renewed pressures induced by the pandemic in recent weeks," RICS said. December’s figure was the weakest since April 2020.

The net balance of surveyors reporting that house prices have risen over the last three months eased to +65% from +66 in November. It was, however, above consensus for +61%.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The housing market was still running hot in December, as prospective buyers mobilised before the threshold for stamp duty returns to £125,000 from £500,000 at the end of March.

"Nonetheless, timelier Google Trends data suggest that the market is now starting to cool: the number of people visiting one of the three main property websites has merely been in line with seasonal norms so far this year, having exceeded its 2016-19 average by about 20% through the second half of last year.

"The cooling off in demand likely will be amplified as vaccines are rolled out, making people happier with their pre-Covid housing choices once again, and by a rise in unemployment."

Pantheon is predicting house prices will fall by around 2% over the course of this year.