Transactions fall further as price balance worsens

Key points:

• headline price balance of surveyors edged lower
• New buyer enquiries and newly agreed sales remain negative
• price outlook deteriorated slightly, but sales expectations turned positive

The RICS Housing Market Survey for September shows both a renewed deterioration in the net price balance and a further drop in the level of transactions.

However some comfort may be drawn from the slightly more positive tone to a number of lead indicators of activity.

The (seasonally adjusted) net balance of surveyors reporting falling rather than rising prices edged lower from -81.8 to -84.2 in September, but it is still above the readings posted in the second quarter (which were below -90 on two occasions).

There is still little evidence suggesting that the weakness of the price balance is being driven by distressed selling.

Indeed, new instructions to sell property not only remain negative, but turned increasingly so during September.

It is, however, worth noting that the new instructions balance was skewed by particularly heavy falls in a number of regions including:

• East Anglia
• South West
• Yorkshire and Humberside
• East Midlands.

On the activity side, the new buyer enquiries and newly agreed sales net balances remain negative but they both improved for the fifth consecutive month.

Indeed, the enquiries and agreed sales balances now stand at their strongest levels since May and December 2007 respectively.

The clarification of the speculation surrounding the stamp duty holiday (for properties below £175,000) may have contributed to the less negative trend in buyer enquiries.

That said, completed sales per surveyor (over the last three months) fell to 11.5 per surveyor, which is a new low for the survey (the series was first introduced in 1978).

London continues to occupy bottom place in the activity league with an average of just 8.3 completed sales per surveyor.

At the same time, the inventory of stocks on surveyor’s books fell to 81.5 in September, which is the lowest level since December 2007.

Stocks levels are falling in spite of declining sales partly because some vendors are opting to let their property in the current market climate.

However, the decline in stocks was not enough to prevent another fall in the ratio of sales compared to the stock of unsold property in the market.

The sales to stock ratio - an indicator of market slack and a key indicator of future price changes – dropped to 14.1%, indicating further price falls in the near term are likely.

In terms of the price and activity outlooks, the former deteriorated slightly on the month but it is still well above the April low point.

However, sales expectations turned positive for the first time since February, and are now at their most buoyant level since June 2007.

Looking at the data from a regional perspective, the net price balance remained deeply negative across England and Wales.

Specifically, the balance deteriorated further in London, Wales, the North, the North West and the East Midlands.

It remained unchanged in the South East and Yorkshire and Humberside.

In East Anglia, the South West and the West Midlands, the net price balance improved modestly.

In Scotland the net balance reached new lows, while in Northern Ireland, it also continued to deteriorate.

The full survey can be accessed from the PDF Downloads column to the right of this page.

View a historical index of the survey at www.rics.org/hms.