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UK property sector expects 'sharp slowdown' next year as sales growth loses steam

Tom Belger
·Finance and policy reporter
·3-min read
Homes in Hastings as UK property has seen a boom in sales and prices in the second half of 2020. Photo: Luke MacGregor/Reuters
Homes in Hastings as UK property has seen a boom in sales and prices in the second half of 2020. Photo: Luke MacGregor/Reuters

The UK’s property sales continued to rise in November, but signs are growing of momentum slowing in the housing market.

Fewer surveyors and estate agents reported growth in new buyer enquiries last month than in October, but a large majority still reported continued expansion.

“Buyers continue to look for new homes ahead of the stamp duty cut ending in March,” according to the Royal Institute of Chartered Surveyors (RICS)’ latest residential market survey on Thursday.

Most RICS members expect weaker sales in the year ahead, with some citing rising unemployment and the looming return of higher stamp duty and land tax levels across the UK.

READ MORE: UK house prices rise at fastest pace since 2004

Firms in the West Midlands, East Midlands and Scotland highlighted a flatter trend in agreed sales, while other areas reported continued growth.

“It is clear from responses to the latest survey that there is considerable concern about the prospect of a sharp slowdown in transaction activity following the end of the first quarter of the coming year,” said Simon Rubinsohn, chief economist at RICS.

WATCH: UK minister says Britain’s path to recovery still uncertain

“A scaling back in direct government support for the market is part of the reason for this but it is being compounded by expectations of material rise in unemployment as redundancy programmes begin to take effect.

“A key issue as government looks to continue to build the delivery pipeline will be the response of developers to a tougher market without the incentive of the stamp duty break and the tapering of the Help to Buy scheme.”

But the anticipated sales downturn is not expected to knock prices. A net balance of +20% of RICS members — subtracting those who expect declines from those who expect gains—anticipate higher prices over the year ahead. The reading increased from +8% in October.

READ MORE: UK builders’ orders at six-year high as property boom rides out lockdowns

It comes after Halifax data earlier this week showed the biggest five-month increases in property prices since 2004, with average sale prices rising £3,000 between October and November alone.

“There is little sense that the projected softer sales picture will feed through into pricing which is viewed as likely to prove rather stickier in the face of ongoing macro challenges,” added Rubinsohn.

Property listings site Zoopla has previously made similar predictions, with a lack of supply limiting buyers’ ability to negotiate down prices even as they face higher taxes. Several macroeconomic forecasters have predicted price declines in 2021, however.

READ MORE: Record decline in UK consumer borrowing but mortgages hit 13-year high

Meanwhile demand from tenants appears more consistent, little changed between October and November. Most estate agents and surveyors also reported landlord instructions falling.

For a third month the vast majority of London firms predicted rents would fall in the capital, compared with expectations of modest growth in much of the rest of the UK.

WATCH: What do stamp duty cuts mean for buyers and house prices?