| Housing market slumps by one third: RICS survey |
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How a little anxiety can affect commerce was best demonstrated by the housing market recently. According to a study by the Royal Institution of Chartered Surveyors (RICS), the number of houses sold dropped by one third reflecting fears of an interest rate hike after the General Election.
The RICS monthly survey registered more than the 30 per cent drop, when it compared several aspects of the property market to the same period last year. Chartered surveyors reported that house prices (down from last month’s 37 per cent) dropped consistently for the second month.
Newly agreed sales and buyer enquiries showed little movement during the last two months, which was confirmed by national market indicators. The next three months could see similar sluggishness according to Mike Henning, spokesman for RICS. He said that prices appeared to be on a decline across the nation.
The survey noted an expansion in the stock (growing 5 percent over the last three months) of unsold property on surveyors' books. The number of selling instructions grew at the fastest pace seen in recent years. There was also an increase in the number of sellers. The increase in choices has meant buyers now have more bargaining power. Even so, potential buyers remained hesitant and the number of new enquiries showed no movement in the last four months.
The scenario across different regions of the UK was largely similar and inspired little hope of an immediate about-turn. Although sales in some areas have shown stability they remain considerably down on last year’s, which was confirmed by 41 per cent of surveyors. London registered deteriorating prices in April after having remained stable for four months. The North-east showed prices on a downslide, though at a slower rate in April compared to the pace reported in the first quarter this year.
The only improvement, if at all, seems to be in new buyer enquiries and newly agreed sales which had dropped considerably around December 2004, signalling the end of the boom in the property market. And the only place that showed a price rise was Scotland, although the rate of increase has now slowed down. Demand conditions across the UK appeared largely subdued.
Some sellers were contributing to this sluggishness by setting unrealistic prices to properties. According to some surveyors, these sellers have still not adjusted to the market conditions and changes that took place over the last 6-9 months. But there is a silver lining to this gloomy picture. Interest rate has remained unchanged for the ninth consecutive month. The job market is improving. Unemployment rate is down. Earnings also appear to be improving. And borrowers are now choosing options like remortgaging. All these are contributing to make properties more affordable and should encourage buyers to return to the market.
Additionally, if the Bank of England announces a drop in borrowing rate (currently at 4.75%), as some economists recommend and expect in August, then nothing can keep the market from taking an about-turn. RICS and other surveyors may then have to revise their expectations for the next six months.
Posted
on : Wed, 18 May 2005 12:30 GMT | Mortgages News
By : Salim Patel
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