Is Demand Becoming too much for Supply?
23 November 2015
The Guardian has reported this week that the supply of properties coming on to the market fell for a ninth month in a row this October, which has driven up prices on homes for sale. The Royal Institution of Chartered Surveyors (RICS) published a report on the housing market for the last month, and it should that the supply scarcity extended into the autumn.
In its report, RICS also recorded that across the UK, 10% more members saw a fall in instructions by home sellers than they did a rise. At the same time, though, inquiries from would-be buyers increased. Experts have looked at this report and have claimed that potential sellers are being dissuaded by the high cost of moving and that the lack of stock could be self-perpetuating, as the shortage of possible places to move also discourages people to put up their home for sale.
Estate agents in East Anglia were most likely to report rises in the price of homes, with 91% more stating that they have seen an increase rather than a fall, and they say that there will most likely be rises to come over the following year. In London, the picture is also similar, with 5% of agents saying that they would expect to see a rise than a fall in prices. Furthermore, mortgage lenders have reported an increase in lending since early this year, whilst H M Revenue and Customs have recorded a rise in transactions.
The chief economist on RICS, Simon Rubinsohn, has said: ”It is hard to get away from the issue of supply when it comes to the current state of the housing market. The legacy of the drop in new build, following the onset of the global financial crisis, is now really hitting home, with both the sales and letting markets, continuing to show demand outstripping supply on a month-by-month basis.” RICS has also claimed that they expect price rises to be at around 4.5% a year for the next five years, meaning that the average cost of a home in England and Wales would have an extra £42,000. they also say that renting will rise as well, as demand from tenants stays strong. Around the UK, demand for rented homes continues to outstrip supply.
This claim in supported by Alan Williams an estate agent from Colchester, who has reported to have said in the article in the Guardian that there is still a lot of demand in the market today. He went to say that ”any fall-throughs we have are reselling quickly, and often at higher figures.” The article also drew comments from another agent from East Anglia, Chris Philpot, who said that strong prices are still being achieved. ”Instead of vendors dropping prices to sell during the last months of 2015, buyers are paying good prices to make a purchase before the winter.”
The picture painted of house prices on the rise has long been displayed in the housing market, but this report that another reason for this is due to property shortages has made the picture even more grim.