Distress sales yet to filter through
RICS UK housing market survey, April 2008
PR031
The balance of Chartered Surveyors reporting house price falls increased even further but tight supply is limiting the extent of the decline, says RICS’ UK housing market survey published today (13 May 2008).
The RICS house price balance dropped for the ninth month in succession. 95.1 percent more Chartered Surveyors reported a fall than a rise in house prices, an increase from 79.4 percent in March. The regional picture is even more depressed with surveyors in East Anglia, the North and North West unanimous that house prices are falling. The net balance in Scotland turned negative where previously it was the only UK region where the majority of surveyors were reporting house price increases.
However, the scale of house price falls remains relatively small at this stage compared to past downturns. The lack of new instructions to sell property continues to provide a crutch to the market. Large numbers of distress sales (either repossessions or sales from those attempting to avoid the repossession process) have not yet appeared in the market place and, while mortgage arrears remain low and the employment situation remains strong, the lack of supply will continue to prevent large declines.
Demand continued to weaken as new buyers’ enquiries fell further. 68 percent more Chartered Surveyors reported a fall than a rise in new buyer enquiries, up from 51 percent in January. Many would-be-buyers are either struggling to raise the necessary finance or are exercising caution in the light of current economic uncertainty. With the official interest rate cuts not being fully passed on to the high street, lenders continue to pull back on the range of mortgage products and further scale down loan to value ratios, there is little expectation that demand will improve in the near term.
As a result of this lack of supply, the average number of unsold stock on surveyors’ books edges down. The ratio of completed sales compared to the stock of unsold property on the market fell to 21.1 percent, down from 24.6 percent. Looking forward, the net balance of surveyors expecting prices to rise is at -80 percent, compared to -74 percent in March.
Commenting, RICS spokesperson Ian Perry said:
“Although most surveyors are now seeing price declines, the extent of the fall, is at this stage, quite modest. The real issue is the collapse in the number of housing transactions. This has very real implications, not just for the property industry but also the high street and the wider economy.
“Sellers of white goods are likely to suffer if this low level of turnover persists for much longer. This is a key reason why the Bank of England should act at its next meeting by cutting the base rate.”
ENDS
About RICS
RICS (Royal Institution of Chartered Surveyors) is the mark of property professionalism worldwide. It covers all aspects of property, construction and associated environmental issues. RICS has 140,000 members globally and represents, regulates and promotes the work of property professionals throughout 146 countries. RICS is governed by a Royal Charter approved by Parliament which requires it to act in the public interest. It is also a professional regulatory body approved by Government (HM Treasury).
Notes for editors:
The RICS question on measuring house price changes is as follows:
“Indicate by how much average house prices have changed over the last three months.” (Answers either being – falling, the same or rising)
RICS housing market survey is the longest running monthly survey of house prices in the UK, collecting data since January 1978. The survey is cited by the Bank of England's monetary policy committee at its monthly interest rate setting meetings.
For further information regarding affordability conditions view RICS accessibility and affordability Indices:
http://www.rics.org/affordability
The RICS accessibility Index is a UK industry first, it calculates the upfront cost of an average priced home bought by First time buyers as a percentage of average annual take home pay. The inclusion of a varying loan-to-value ratio helps provide a more accurate picture of the interaction between house prices, incomes and required deposit. Stamp duty costs, when the average price of a FTB house is above the zero rate threshold, is also included in our calculations of up-front cost (we have not taken into account other up-front costs). The problem with using an affordability measure in isolation is that it gives a narrow picture of difficulties faced by prospective buyers, and does not give any information on the ability to muster up a sufficient deposit.
For further information, please contact:
Stephen Thornton
Senior Press Officer
RICS Corporate Communications
T: +44 020 7695 1682
M: +44 07969 177150
