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Private rental sector must grow to plug gap left by slow house market

The average price of a house in the UK rose by 3.9% in the year to April 2018, according to the latest index from HM Land Registry. This was down from 4.2% in the year to March, making the average price of a property £226,906.

Looking at the demand for housing, the Royal Institution of Chartered Surveyors’ (RICS) Residential Market Survey reported that new buyer enquiries were more or less unchanged during April.

On the supply side, RICS revealed a continued decline in new instructions. Average stock levels for estate agents remain near a record low. Both sales and price expectations continue to be flat in the near term; however, there is greater optimism in the longer-term outlook, particularly for prices.

In the Bank of England’s Agents’ summary of business conditions for the period covering late February to mid-April, agents reported subdued market activity overall. Both demand and supply were weak in the market for existing properties, whereas demand for new builds had been robust, supported by Help to Buy.

The UK Property Transaction Statistics for April showed that on a seasonally adjusted basis, the number of transactions on residential properties with a value of £40,000 was 2.7% lower compared to a year ago.

The Bank of England’s Money and Credit release for April showed that on a seasonally adjusted basis, 62,455 mortgages were approved. This is a decrease of 347 from the previous month and below the six-month average of 63,968. Mortgage approvals are seen to be a leading indicator of transactions volumes.

John Goodall, CEO of buy to let specialist Landbay, said:

“House price growth may be beginning to slow down, but affordability remains a concern for many aspiring homeowners struggling to get a foot on the ladder. Insufficient housebuilding is restricting the number of homes available for sale, and when demand begins to pick up again, this will create pressure on prices.

“With wages falling and rents still rising, first-time buyers are often left with very little to put towards a deposit each month. And with the average deposit standing at £33k, the scale of the task is daunting. This means they will continue rely on the private rental sector to house them as they save, which is why greater investment in the supply of properties to rent, not just buy, is critical at a time like this.”

 

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