January price balance continues downward trend

The balance of surveyors reporting house price falls increased again in January, says the latest RICS’ UK housing market survey.

The RICS house price balance dropped for the sixth month in succession signalling half a year of negative market sentiment. 54.7 percent more Chartered Surveyors reported a fall than a rise in house prices an increase from 49.1 percent in December. According to surveyors, the only part of the UK where prices continue to rise is Scotland with the net balance of surveyors in that country reporting price rises edging up from 3% to 7%.

The decline in demand picked up speed as new buyer enquiries fell at the fastest pace since October. Prior to October, the previous occasion when buyer enquiries reached this level was August 2004. 35 percent more chartered surveyors reported a fall than a rise in new buyer enquiries, down from 25 percent in December. The fall out from credit crunch continues to prevent many would-be-buyers from entering the market and it is likely that demand will remain subdued while mortgage lending criteria is tight.

This weak trend in demand is having a visible impact on the market despite a lack of supply. The stock of unsold property on surveyors’ books jumped by more than 10 percent and has increased by in excess of 40 percent since September 2007. Currently the average level of unsold property per surveyor stands at 85 – the highest level since February 1999 when the average figure per surveyor was 86. As a result the ratio of completed sales compared to the stock of unsold property on the market fell to 28.6 percent down from 30.7.

RICS spokesman, Jeremy Leaf, said: “A lack of demand and confidence in the housing market is clearly behind the recent price slowdown. Tightening mortgage lending criteria is a block to many who are keen to take the housing market plunge. Agents are finding it difficult to market properties to an audience which has decided to watch the current economic theatre from the wings.

“However, if mortgage lenders filter the recent interest rate cuts into the market, demand should begin to increase. In the near term, the housing market will continue to be shielded from significant price falls while employment conditions are strong. The market need only fear a significant fall in prices if job loses start to multiply.”