House Prices Fall Faster Than Anticipated
Recent figures from the Halifax indicated a definite cooling in the housing market; figures at the same time from Nationwide were a little less clear. Now, indications in the latest survey from the Royal Institution of Chartered Surveyors (RICS), are that the housing market is really shaping up for a downturn. Indeed, the housing market could be in worst shape for some time as the survey indicates prices falling faster than at any time in the past two years.
The September RICS report showed a surprising increase in the number of members reporting a fall in house prices. There were 14.6 percent more surveyors who reported a drop in house prices than those who reported a rise; the figure in August had been only 3.3 percent, and RICS were expecting little change.
The number of buyers is down again, falling for the tenth month in a row, and at its fastest rate for well over four years. The fall in September was the fastest since September 2005, when there were 19.4 percent more surveyors who reported a drop in house prices than those who reported a rise.
RICS said that the five base rate rises seen since August 2006, together with mortgage providers re-thinking their lending criteria as a knock-on from the global credit crunch had caused buyers to think long and hard before deciding to go ahead and buy. Thus 51 percent of surveyors noted a reduction in the number of people seeking to buy, down from the 39 percent in August.
The outlook for both prices and buyers appears to be pessimistic, according to RICS surveyors. Going forward, house prices are expected to dip to their lowest level since May 2005. The number of properties coming to the market for sale was also down - for the fourth consecutive month. Home Information Packs (HIPs) are partly blamed, but overall confidence is down. The only region to buck that downward trend was London.
RICS spokesman Jeremy Leaf said: "Although house prices continue to fall, the underlying economy remains strong. A major correction in the market seems unlikely while economic growth is above trend and employment conditions remain buoyant. The combination of rising interest rates, the introduction of HIPs and volatility in the financial markets resulting in tightening of lending criteria, has certainly affected the confidence of buyers and sellers. As a result, some would-be buyers are turning to the rental market whereas others, conscious that the next move in interest rates is now likely to be down rather than up and market meltdown is highly improbable, are seizing the opportunity to negotiate with more flexible vendors in a less competitive marketplace."
Chief economist at Global Insight, Howard Archer, said: "Given this backdrop, there is undeniably an increased risk that the housing market could see a sharp correction over the coming months. The risk will increase if an extended credit crunch increasingly feeds through to have a marked dampening impact on UK economic activity and causes unemployment to start rising."
London and Scotland were the only regions to see rising prices. East Anglia, the Midlands and Wales saw the biggest falls in September.
Published on October 15, 2007
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