The gap between supply of new property listings coming onto the market and demand from those looking to buy was its widest for more than seven years in May as the rush to beat the end of the stamp duty holiday continues, according to the latest index from the Royal Institution of Chartered Surveyors.
The number of people looking to buy a new home continued to rise in May, with a net balance of 32% of surveyors reporting an increase in prospective buyers.
At the same time a net balance of -21% respondents reported another fall in the number of new listings being brought to market.
The disparity between new buyer enquiries and new sales instructions is at its widest since November 2013.
RICS says there are some signs that the number of properties coming to market could increase over the coming months.
There has been an increase in the number of market appraisals that its members have been asked to carry out compared to the same time last year, with a net balance of 24% of survey respondents reporting a rise.
Agreed sales also increased, with a net balance of 30% of respondents reporting a rise, but this was down from 47% in April.
Surveyors expect sales to continue to rise in the coming three months with 10% of respondents predicting an increase, however this is down from 21% last month.
But this boom in sales is not expected to last, as sales predictions for the coming twelve months have now turned flat, suggesting that the stamp duty holiday is the primary driving force behind it.
However, RICS says that current market conditions suggest that there is no sign of house price inflation losing any steam.
A net balance of 83% of respondents reported house price rises in May, up from 76% in April, marking the fourth successive month in which upward pressure has intensified.
All parts of the UK show that house prices have risen and 45% of respondents expect house prices will continue rising in the coming three months.
Looking at the year ahead, a net balance of 64% of respondents are expecting an increase.
Tenant demand continues to outstrip supply in the rental market, leading to expectations that rents will rise further in the coming three months.
In May, a net balance of 48% of surveyors reported a rise in demand for rental properties.
However, for the tenth successive month, the number of new rental property listings fell, with 21% of respondents reporting a decrease.
This disparity has led to 55% of respondents predicting rents to rise in the coming three months.
Looking further ahead, respondents expect rents to rise by around 3%.
RICS chief economist Simon Rubinsoh says: “Ending a tax break always has the potential to be a little disruptive for a market but with the economy performing better than could have been expected even a short while ago and the cost of money still at rock bottom levels, the principal drivers supporting demand will remain in place even after the expiry of the stamp duty holiday.
“More challenging is the question of supply, a theme coming back strongly from respondents to the survey both with regard to the sales and lettings markets.
“The government’s planning reforms including the relaxation of permitted developments rights is clearly designed to address this problem but the jump in five year expectations for prices and rents to their highest levels since the middle of the last decade suggests that there is a degree of scepticism about whether this approach will deliver a significant enough uplift in housebuilding numbers.”
Shawbrook Bank managing director of property finance John Eastgate says: “We’re in a blink-and-you-miss-it market.
“Such heady demand might well be the result of the government stimulus but when the dust settles, we’ll see that robust levels of demand will persist.
“The tapered ending of the stamp duty holiday and the naturally slower pace of the winter market will offer a correction of sorts.
“But the market must be given credit, it was robust before March 2020 and will remain so for the foreseeable future.
“There’s speculation that the easing of lockdown restrictions and a rise in consumer spending could trigger rising inflation.
“But this isn’t – and shouldn’t be – enough to put buyers or investors off; borrowing remains largely accessible and affordable and the economy is well set to recover.”
Together director of sales Sundeep Patel says: “With today’s data showing -21% of respondents reported another fall in the number of new listings being brought to market and Andy Haldane’s, chief economist at the Bank of England, remark earlier this week about the UK property market being ‘on fire’ – only reconfirms the widely reported market concerns over future supply and demand issues.
“That said, with the government’s First Homes scheme now launched and the new Planning Bill to prop up more regional housebuilding, it does seem as though there are a few boosts on the horizon for first-time buyers who have their sights set on getting on the ladder in the next few years.”