Housing Market Looks Bad Says RICS
House prices are falling at the same rate that they did in the housing market crash of the early 1990s according to the latest survey from the Royal Institution of Chartered Surveyors (RICS). Only further reductions in the base interest rate will avoid a property meltdown, says the surveyor group.
Estate agents, 500 of whom completed the survey, have reported prices to be falling in their highest numbers since 1992. One from Salisbury was quoted as saying December was "maybe the worst [month] we have had in 17 years." Over six in every ten of those completing the survey said that house prices had fallen in the last quarter of 2007.
There are fears that the market is heading back to the miserable days of the early 1990s when many people fell into the negative equity trap.
RICS spokesman Ian Perry said: "The Bank of England may have to cut rates further if the market is to remain stable." Last week the Bank held firm on interest rates, holding them at 5.5%, after the quarter point cut in December.
RICS regards seasonally adjusted figures as very important, and these suggest that the difference between those reporting a fall and rise was at its highest for over fifteen years - 49.1% in December.
Nearly all regions have been hit and the West Midlands is suffering its fastest fall in history.
The housing market was variously described by estate agents as 'depressing', 'fragile', and 'extremely quiet'. One from Essex felt that the crisis could last for five years, saying that more reductions in interest rates were needed to avoid a 90s style property recession. Another agent blamed the combination of Home Information Packs (HIPs), Christmas, interest rates and the credit crunch mean 'hard times'.
Unpopular with RICS members, HIPs have been criticised for many months and blamed by many for housing market problems. All sellers must now have a pack, and estate agents believe this has deterred many people from putting their house on the market to 'test the water'. Prior to HIPs many in that position did actually sell their house after receiving a persuasive offer.
Capital Economics forecasts that house prices will fall by 5% in 2008 and 8% in 2009.
Home owners have worse news to contend with. Despite the Bank of England's interest rate cut in December the average price of a fixed rate mortgage is still going up. In early December it was 7.30%, but now it has crept up to 7.31%.
Industry watchers moneysupermarket.com say there are still a few deals to be found for borrowers who have an excellent credit history. Rates for them can be 0.39% lower than a month ago. However, most people looking for a fixed rate deal are likely to have to pay more.
Head of mortgages at moneysupermarket.com, Louise Cuming, said: "I shudder to think what would have happened to the average fixed-rate mortgage if the Bank of England had not cut the rate. Many homeowners who waited until after the interest rate cut to get a fixed-rate deal will be worse off."
Published on January 18, 2008
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