The housing market in England and Wales weakened in December as restrictions were tightened across both nations and the end of the stamp duty holiday drew closer, according to a closely watched survey.
Sales, new inquiries, near-term transactions and house price expectations all softened in December, the Royal Institution of Chartered Surveyors’ monthly survey showed on Thursday.
The report provides the strongest evidence so far that the buoyant housing market weakened at the end of last year as the country faced a surge in infections from a more transmissible Covid-19 variant.
Simon Rubinsohn, chief economist at Rics, said: “Although the housing market remains open for business in the midst of the latest national lockdown, there is a sense from respondents to the survey that the new restrictions will still impact on transaction activity over the coming months.”
The end of the stamp duty holiday on March 31 also cast a shadow over the market. The government’s relief on the first £500,000 of the value of a property used as a primary residence boosted the housing market after its introduction in July, but the Rics survey showed momentum easing across many measures.
In December the Rics index for new buyers’ inquiries slipped to 15 in December from 26 the previous month and down from a high of 75 in June.
It is calculated as the difference between the proportion of surveyors reporting an expansion in activity and those reporting a contraction.
Similar slowdowns were registered for newly agreed sales and for the number of properties being listed. Expectations were more downbeat, with the index for sales forecast over the next three months slipping to minus 22 in December, the lowest since April.
The weakening momentum has not yet translated into softer house price growth. The house price index in December came in at a strong reading of 65, similar to those of the past four months and stronger than the 62 forecast by economists polled by Reuters.
The house price index points to “significant upward pressure on house prices across the UK as a whole”, according to Rics. However, surveyors see momentum fading significantly over the next three months.
London was an exception, with surveyors reporting subdued house price inflation. The majority also expected rental prices in the capital to decline in the three months ahead, in sharp contrast with an expansion expected for the country as a whole.
Andrew Wishart, property economist at consultancy Capital Economics, said that some of the rent reductions in London compared with rents elsewhere “will be permanent” as for many “living with parents or renting or buying a house in a more affordable area will be a more attractive option”.
The housing market in the capital has underperformed many other parts of the country as remote work has made it possible for a greater number of people to live outside city centres.
The Rics December survey supports other evidence of a cooling of the property market. In December the Halifax house price index slowed to the lowest monthly rate in six months. On Wednesday, Persimmon, the UK’s biggest housebuilder, reported lower sales than in the summer.
Howard Archer, chief economic adviser to the EY Item Club, said he suspected that the robustness of the housing market would prove unsustainable “sooner rather than later”.
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