Sustained demand for housing, along with dwindling supply, is causing property prices to soar. This is according to a recent survey by the Royal Institution of Chartered Surveyors (RICS). The data from RICS shows that although estate agents reported a high number of house sales in April due to high demand, the number of fresh listings on the market is worryingly low and cannot match the current demand.
We take a closer look at the numbers and explore what they could mean for the housing market’s immediate future.
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What’s happening to the demand for housing?
The latest survey by RICS, which covers the month of April, shows that buyer demand was up by 44%. The same measure was 43% in March, which indicates that buyer demand is being sustained at the same high level.
The high level of demand is not unexpected. The pandemic has forced many to re-evaluate what they want from their homes. More rooms and space, larger gardens and work-from-home options are at the top of most people’s wish lists.
Are house sales still rising?
Not surprisingly, sustained high demand for housing has seen estate agents across the country enjoy a phenomenal month of sales.
As mentioned by Sarah Coles, personal finance analyst at Hargreaves Lansdown, average sales per surveyor are the highest they have been for years.
Is supply matching demand?
The number of fresh listings on the market is not nearly high enough to match the interest shown by potential buyers. The RICS report shows that the balance of new house sales fell significantly from a high of +21% in March to -4% in April.
Additionally, the average number of properties on estate agents’ books has fallen from 46 in December last year to just 40 in April.
In short, there is an emerging imbalance between supply and demand, and it appears to be pushing property prices up.
The RICS gauge of house prices – which reflects the proportion of surveyors reporting price increases – jumped in April to +75% from +62% in March. This is the highest level since 1988.
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What does the future hold?
Sarah Coles reckons that we are likely to see the acceleration in house price rises continue in the immediate future: “A combination of the stamp duty holiday, government guarantees for high loan-to-value mortgages, the race for space and the seasonal surge should mean a hectic summer and yet more price rises.”
She does add that the pandemic could still throw a spanner in the works, slowing house price growth. New coronavirus strains, for example, could derail the economy’s reopening and sap market optimism and confidence.
At the moment, though, Coles predicts that “estate agents look set for a bumper summer”.
Should I buy a house now?
Understandably, at the current rate of house price growth, some buyers may feel as if time is running out. They might feel compelled to act fast and bid high to get the home they want before it becomes unaffordable.
Coles advises that buyers be cautious and avoid overstretching themselves: “the heat in the market won’t last forever. And when this inevitably cyclical market changes, you need to be left feeling you bought the home you wanted for a price you could afford.”
