Tue 13 May 2008
Housing market remains fragile
There is mounting evidence that residential property prices are waning, which is frightening off both propspective vendors and purchasers, leaving the housing market highly vulnerable, according to a fresh report out today.The latest monthly report by the Royal Institution of Chartered Surveyors (RICS) reveals that house market confidence has plummeted over the past month. 95% more surveyors thought prices were falling in their area in April, compared with a balance of 79% the previous month. A total of 80% projected that prices will decline further.
RICS’ findings are the gloomiest since the survey began in 1978, with a balance of 82% of surveyors reporting that property prices were falling.
Chief economist at RICS, Simon Rubinsohn, said that the whole of the UK was adversely affected by the downturn in the housing market, whereas the housing crash of the early 1990s was predominately concentrated in the southern regions.
The sales-to-stock ratio has fallen from from 24.6% in March to 21.1% in April, the lowest since 1996. This appears to reflect a growing reluctance among both sellers and buyers to negotiate a deal, due to a lack of certainty over house prices.
The RICS report shows that fewer homes were sold in all regions except London, the south-west and Yorkshire. Furthermore, the volume of inquiries for homes were falling at the fastest pace in a decade. The level of completed property sales in the three months to April was a third lower than a year earlier, after 12 months of contraction.
The lack of new instructions may actually support property prices, at least in the short-term. However, tougher credit conditions will no doubt continue to impact negatively on the market, as some propspective buyers will continue to find it difficult to obtain a mortgage.
John Halman, a surveyor at Gascoigne Halman in Cheshire, commented: "No credit, no confidence, no customers… It's time to hold your nerve."
Commenting on the RICS housing survey, Ross Bowen, managing director of Connells Survey & Valuation said: "A shortening supply of homes coming onto the market is far more worrying than moderating house prices. Transactions have halved in the last year. Many people are severely restricted in accessing affordable mortgages, and first time buyers are at a particular disadvantage. The government and the Bank of England must address the lack of mortgage finance available to borrowers if we are to get the property market moving again. We need to see lower interest rates passed onto homebuyers and a lifting of restrictive lending criteria."
Peter Bolton King (pictured), Chief Executive of the National Association of Estate Agents (NAEA), added: "The report reflects our own take on the market – the house prices falls that are taking place are modest and the picture is still patchy with some areas of the country finding it tougher than others.
"There is no denying that the credit crunch has affected confidence in the market – especially first-time buyers who are finding it hard to find financing to get on the ladder. But it is still important to remember that the underlying factors that support the property market remain: low unemployment, historically low interest rates and a pent-up demand for houses. Therefore, rather than a dramatic fall that some doom and gloom merchants are predicting, it shows we are looking at a return to a more steady market rather than the fantastic price hikes we have seen in the previous ten years."
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