House hunting is like looking for a needle in a haystack: number of homes for sale plummets to a new record low, says RICS.
What’s the latest?
The property shortage intensified during November with the number of homes on the market falling to a new record low.
The Royal Institution of Chartered Surveyors (RICS) said the “worrying” trend was creating an unrealistic housing market in some parts of the country, while also deterring new buyers from purchasing a home.
Meanwhile, the mismatch between supply and demand is continuing to push property prices higher.
Why is this happening?
The housing market has been dogged by a shortage of homes for sale since early 2014, but the problem appears to be intensifying with new instructions falling for the tenth consecutive month in November.
It is hard to say exactly why the problem is so severe at present, but a contributing factor is that the UK is currently building around 100,000 too few homes each year that are needed to keep pace with demand.
Meanwhile, anecdotal evidence suggests some people trading up the property ladder are keeping their current home as an investment and renting it out, meaning it does not come back on to the market.
Who does it affect?
The shortage of homes for sale is becoming a real problem for anyone wanting to buy a property, as there is currently very limited choice.
RICS said the lack of choice was now beginning to deter potential buyers from entering the market at all, with the number of sales agreed remaining flat in November.
The situation is also beginning to distort the housing market in certain regions, with sellers asking unrealistic prices.
In fact, 49% more estate agents said property values rose, with East Anglia, the south east and the East Midlands seeing the strongest growth. But in London, the rate of house price growth slowed for the fourth consecutive month.
Sounds interesting. What’s the background?
Despite low level of stock currently holding back sales levels, estate agents are optimistic that transactions will pick up in the coming months.
"I can’t recall a set of comments in the residential survey which have so frequently drawn attention to lack of stock on the market."
Part of this positive outlook is attributed to the raft of new housing policies announced in the Chancellor’s Autumn Statement, including new Help to Buy and Starter Homes initiatives.
Meanwhile, the new higher ‘landlord’ Stamp Duty rates are likely to deter buy-to-let investors, and may dampen demand for second homes.
Simon Rubinsohn, RICS chief economist, said: “I can’t recall a set of comments in the residential survey which have so frequently drawn attention to lack of stock on the market.
“Given this, it is hard not to envisage prices continuing to climb upwards as we move through the early stages of 2016.
“It remains to be seen how successful the government’s latest set of initiatives will be in driving up the rate of new build, but with the best will in the world, it is likely that the boost to demand will come through rather more rapidly than the expansion of the development pipeline.”
Top 3 Takeaways
- The property shortage intensified during November with the number of homes for sale falling to a new record low.
- The mismatch between supply and demand is continuing to push property prices higher.
- The shortage of homes for sale is deterring some buyers from entering the market.
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