Market Update - Housing Market Activity Summer 2011 [source: Knight Frank Global Briefing]

Estate agents reported that while new buyer enquiries fell slightly in May, newly agreed sales edged upwards, albeit at a very slow pace. There was also a rise in the number of new properties being put on the market, causing the sales-to-stock ratio to fall to around 20%, well below the long-run average of 33%.

But agents surveyed by RICS expect that the number of sales will continue to rise modestly in the next three months, although they also anticipate further falls in house prices.

Mortgage lending, another key indicator of activity in the market, also picked up during the month, with figures from the Council of Mortgage Lenders (CML) showing that gross mortgage lending totaled £11.3 billion in May, up 12% from April and 1% from May last year. The CML recently revised down its forecasts for housing transactions this year by 20,000 to 840,000, which is well below the long-run average of 1.2 million transactions a year. But activity is expected to improve next year, with 900,000 transactions forecast. Meanwhile the rental market continues to go from strength to strength as those unable to get on the property ladder are forced to live in rented accommodation.

Demand continues to outstrip supply in many areas of the country, which is pushing up rents. Rents for prime London properties rose by 0.3% in June, taking the annual increase to 15.2%. Rents are now 26% higher than in June 2009.