The Royal Institute of Chartered Surveyors (RICS) issued this assessment report on the UK’s property market this afternoon:

Early November saw one of the most well flagged changes to interest rates since the Bank of England (BoE) became independent. After August’s interest rate rise, which took the markets by surprise, everyone expected interest rates to continue their journey upward. In the statement accompanying the decision the BoE mentioned volatile but rising consumer spending, rising business investment, strong economic growth in UK export markets and the rapid increases in broad money and asset prices as the reasons behind the interest rate hike. With economic conditions still firm, further rate hikes in the New Year are likely.

Commercial property

Occupier demand in the commercial property market expanded into October as output in both the service and industrial sectors continued to firm. Rents in the retail and industrial markets have shown some belated signs of improvement in October, indicating that a rental trough may have now passed. Annual office rents rose 4.6% in the year to October with retail at 3.5% and industrial rents at 1.3%.

Construction

The construction sector continued to boom as we moved into the fourth quarter, with the general picture continuing to be one of robust expansion. The construction industry grew by 0.6% in Q3, pushing the annual growth rate to the highest level in over a year at 1.7%, as the booming residential and commercial property markets weighed more decisively on activity levels than the August interest rate rise.

Residential property

The latest figures from RICS show that house prices rose for a twelfth consecutive month in October, up at the fastest pace since September 2002. The strongest rises in prices are in London and the South of England on the back of a booming City economy. The November rise in interest rates to 5% will help cool the housing market, and at the same time promote economic stability.

RICS – December 12 2006

In a report released this afternoon, the RICS comments on the UK market:

Strong economic activity during the third quarter alongside above target inflation has raised the chances of an interest rate hike in November. With both the service sector and industrial production now in expansionary mode and capacity constraints apparent, we expect interest rates to climb into the New Year. However, the rapid expansion of the labour force may continue to curtail wage pressures and will prevent the Bank of England applying the breaks on the economy too quickly.

Commercial property

Occupier demand in the commercial property market has strengthened in line with the improving economy. Rents increased by 3.2% in the year to September, the firmest rise in five years. This tallies with economic activity which has been robust in the past year with 2006 set to be the best year for growth since 2000 with the one exception being 2004. Rental growth was again driven by the office sector, which has now overtaken that of the retail property for the first time since February 2002.

Construction

Growth in construction workloads slowed fractionally in Q3 after increasing for three consecutive quarters. However, growth in workloads is still high and well above year ago rates. The strongest sectors of activity were private commercial and private housing, which have both now grown above their long-run averages for four consecutive quarters. In the private
industrial sector workloads showed signs of stabilising.

Residential property

House price growth in September hit the fastest pace since October 2002. Price rises are being driven by a combination of new buyers entering the market and falling property supply. Price rises were again led by London and the South East, which have been supported by a booming City economy. Moderate rises have been recorded across most other regions.

The Royal Institution of Chartered Surveyors (RICS) has sternly criticised the UK Government’s decision to scrap the Home Condition Report (HCR) from Home Information Packs (HIPs). They claim that the Government failed to allow sufficient time to iron out the problem of training adequate numbers of Home Inspectors – an issue the RICS identified over a year ago.
“If the Government had worked together with industry, as suggested, a workable solution would have been possible” the influential body stated in a press release.
RICS research into the effect of HIPs on the UK housing market suggests the Government’s decision leans towards the low-regulatory model used in Australia where their version of the Home Information Packs are compulsory, but the HCR equivalent is not. The Australian model is a low cost approach to simplify the home buying process, and when introduced back in June 1988 had no effect on housing market activity.

Related Posts:

• HIPs u-turn reaction: ‘half-HIP’ useless but expensive waste of time.
• Rightmove hit as HIP rules changed

Surveyor confidence “highest in two years” – RICS

Surveyor confidence “highest in two years” – RICS

Surveyor confidence “highest in two years” – RICS

Surveyor confidence “highest in two years” – RICS

Surveyor confidence “highest in two years” – RICS

Surveyor confidence “highest in two years” – RICS

Property owners will be among those hoping to see changes to the way stamp duty is imposed in tomorrows budget.
Under the current arrangements, anyone selling a home worth over £250,000 has to pay three per cent of the sale price to the Treasury. A home that sells for as little as £1 underneath that threshold will only incur a levy of one per cent.
The Royal Institute of Chartered Surveyors (RICS) is one of the many critics of the current system. “There is no reason for stamp duty as it is, the slab system means that if you move only one pound from 249,000 to 250,000 you could be slapped with a huge bill, it should be changed to a marginal tax in line with other taxes.”
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