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PRICE BALANCE DROPS FURTHER INTO NEGATIVE TERRITORY IN THE SOUTH WEST

RICS UK housing market survey, December 2007

The balance of surveyors reporting house price falls has reached levels not seen since the early nineties housing market correction, says RICS‘ UK housing market survey published today (16 January 2007).

The RICS house price balance dropped to its lowest level since November 1992. 49.1 percent more Chartered Surveyors reported a fall than a rise in house prices, down from 40.6 in November 2007 - the most negative since November 1992  when 60.1 percent more Chartered Surveyors reported a fall than a rise.

In the South West house prices declined for the fourth consecutive month with the pace of decline reaccelerating, having eased back slightly in the previous month, with 31 percent more Chartered Surveyors reporting a fall than a rise in house prices, compared to 26 percent more reporting a fall last month.

The new instructions net balance turned positive for the first time since May 2007. 4 percent more Chartered Surveyors reported a rise than a fall in new instructions to sell property, compared with -7 percent in November.  Looser supply can be partly attributed to the extension of HIPS (Home Information Packs) to all properties as homeowners attempted to avoid the cost of a HIP by marketing their properties before the deadline. Meanwhile, the credit crunch does appear to have impacted on the London market with a steady supply of property coming onto the market since August. 

However, demand still remains subdued.  25 percent more Chartered Surveyors reported a fall than a rise in buyer enquiries down from 31 percent in October. Many have been prevented from moving forward by tightening mortgage lending criteria but likely interest rate cuts could help stabilise the market as many first time buyers are waiting on the sidelines. The balance of newly agreed sales declined for the seventh consecutive month with falls occurring across the country with 21 percent more Chartered Surveyors reporting a fall than a rise in newly agreed sales.

New buyer enquiries in the South West increased for the first time in six months and moved above the surveys long run average rate in the process with 7 percent more Chartered Surveyors reporting a rise.  New instructions to sell property also increased for the first time in six months, moving back in line with the long run average rate with 5 percent more reporting a rise in new instructions than a fall.

Sustained weakness in demand, combined with loosening supply conditions is resulting in greater stocks of property on surveyors books. The stock of unsold property on surveyors books jumped by 7.1%, following last month‘s rise of 9.1%. As a result, the ratio of completed sales (over the last three months) compared to the stock of unsold property on the market fell to 30.7%. Market conditions are now the loosest they have been since August 2005, although this indicator remains above the 27 percent low recorded earlier that year.

Surveyor confidence in sales and house prices reached the lowest level in a decade. Effects of the credit crunch and the current negative news flow are having a negative impact on sentiment but interest rate cuts may improve optimism in the coming months.

Surveyor confidence in the price outlook in the South West deteriorated sharply, reaching the lowest level in the survey‘s history.  Confidence in sales eased back though it remains in positive territory.

Surveyors reported price falls across all regions in England and Wales. The heaviest falls took place in the West Midlands and East Anglia. Only in Scotland have surveyors reported price rises.

Chartered Surveyors from across the South West reported on their specific area:

David McKillop of McKillop & Gregory in Salisbury, Wiltshire said: “A very quiet month, maybe the worst we have had in 17 years!  Financial news and HIPs dented any optimism in the market.  We expect things to pick up in January.”

Robert Williams of Robert Williams in Exeter, Devon said: “A quiet December but still positive about a healthy New Year market.”

Mark Annett of Mark Annett & Company in Chipping Campden, Gloucestershire said: “Very quiet but that is characteristic for the time of the year.  There are people who want to buy.  Prices may drop a little but the key will be interest rates.  HIPs do not help either!”

John Cowley of Crisp Cowley in Bath, Somerset said: “December was a quieter month, and there is some evidence of renegotiation taking place, and limited price falls, but hopefully projected interest rate reductions will support the market.”

Jasper Feilding of Strutt & Parker in Moreton-in-Marsh, Gloucestershire said: “We remained remarkably busy during the run up to Christmas, although little of this was to do with new instructions.  The New Year will be interesting.”

Oliver Miles of Oliver Miles in Swanage, Dorset said: “A very slow market on all fronts- combination of pessimistic forecast for property market, seasonal slowdown and tightening of credit.”

Roger Punch of Stags in Plymouth, Devon said: “The downward trend of interest rates has provided hope and has started to refresh some confidence.  Again, higher price ranges are less affected by the downturn with a promising level of negotiated sales in December.”

Graham Waterton of Strutt & Parker in Salisbury, Wiltshire said: “Bearing in mind the time of year activity levels are much the same as for the same period last year.  A reasonable amount of activity all round.  There have however been threatened or actual fall-throughs which suggests changing confidence in the market.”

Stephen Morris of Davies & Way in Keynsham, Bristol said: “The market is noticeably quieter than it was a year ago.  Predicted fall in interest rates should help improve confidence in the first quarter.  Those who need to sell a property should take careful note of agent‘s advice.  Lettings business is currently very strong.”

William Gater of Waycotts in Torquay, Devon said: “The market is being affected by the negative press and it is too early to tell if the interest rate cut in December has helped instructions.”

Julian Bunkall of Jackson Stops & Staff in Dorchester, Dorset said: “December is always a difficult month to assess as the market is always quiet in the run-up to Christmas.  However, this month has been particularly quiet due to uncertain economic problems and the negative impact of HIPs.  Fingers crossed that it will pick up in the New Year.”

William Morrision of Knight Frank in Exeter, Devon said: “Quiet as one would expect at this time of year although buyers still remain cautious.” 

Jeffrey Cole of Cole Rayment White in Wadebridge, Cornwall said: “There is so much negative publicity in the media which has really hit buyers confidence.  We are receiving low offers which many vendors are still resisting.  Most buyers are reluctant to offer asking prices as they feel we are in a falling or static market and are in a ‘wait and see mode‘.  Some vendors are dropping asking prices, others feel that things will improve in the spring with the expected interest rate falls.  Only time will tell.”

Paul Knight of Paul Knight Chartered Surveyors in Street, Somerset said: “The depressing trend of the past two months has continued with chains becoming more fragile as lenders requirements have hardened.  Some lenders have withdrawn from sub-prime sector with a resulting delay whilst buyers shop around for new mortgage product.  We expect a rush of new instructions during the coming months as many home-owners come off fixed rate mortgages and find that their disposable income has decreased at the same time as other living costs are rising.”

Robin Thomas of Strutt & Parker in Exeter, Devon said: “Applicant registrations and viewings increased in the run up to Christmas suggesting the early New Year market will be stronger than the autumn market.”

Paul Kingscote of Maggs & Allen in Bristol said: “It would appear that a combination of HIPs and the sustained level of interest rates until December has had an impact on the market.  There also seems to be a lack of consumer confidence perhaps fuelled by media hype towards a market crash.  Christmas has also had its normal impact in slowing the market.”

David Dark of Seldon Ward & Nuttall in Bideford, Devon said: “The market has become increasingly price sensitive.  Sellers need to be competitively priced to secure a sale.  Interest rate reduction welcome, but needs further reduction to have any impact on the market.”

Ian Perry of Perry Bishop & Chambers in Cirencester, Gloucestershire said: “Interest rate reduction has sparked some renewed interest from buyers.”

Mark Lewis of Symonds & Sampson in Sturminster Newton, Dorset said: “A number of buyers are watching and waiting but the more interesting properties are selling well.” 

RICS spokesman, Ian Perry, said:

“The housing market is clearly feeling the pinch from the credit crunch and the round of interest rate hikes in 2007. While sentiment seems to have reached its lowest ebb, the underlying economic conditions are vastly different to what the country experienced in the early 1990s. Supply would have to loosen considerably before prices experience a significant dip.

“However, the coming months will be of great importance to the market and many would-be-buyers will be watching the Bank of England‘s interest rate decisions while lenders remain reluctant to part with finance. The Bank of England may have to cut rates further if the market is to remain in a stable condition.”

ENDS        16th January 2008

For further information please contact Violet Ridge, Sturgess Van Damme, on 01275 349011 or email violet@sturgessvandamme.co.uk

About RICS

RICS (Royal Institution of Chartered Surveyors) is the mark of property professionalism worldwide. It covers all aspects of property, construction and associated environmental issues. RICS has 140,000 members globally and represents, regulates and promotes the work of property professionals throughout 146 countries. RICS is governed by a Royal Charter approved by Parliament which requires it to act in the public interest. It is also a professional regulatory body approved by Government (HM Treasury).

Notes for editors:

The RICS question on measuring house price changes is as follows:

“Indicate by how much average house prices have changed over the last three months.” (Answers either being – falling, the same or rising)

RICS housing market survey is the longest running monthly survey of house prices in the UK, collecting data since January 1978.  The survey is cited by the Bank of England‘s monetary policy committee at its monthly interest rate setting meetings. 

For further information regarding affordability conditions view RICS accessibility and affordability Indices: http://www.rics.org/Property/Residentialproperty/Residentialpropertymarket/Accessibility100107.htm

The RICS accessibility Index is a UK industry first, it calculates the upfront cost of an average priced home bought by First time buyers as a percentage of average annual take home pay. The inclusion of a varying loan-to-value ratio helps provide a more accurate picture of the interaction between house prices, incomes and required deposit. Stamp duty costs, when the average price of a FTB house is above the zero rate threshold, is also included in our calculations of up-front cost (we have not taken into account other up-front costs). The problem with using an affordability measure in isolation is that it gives a narrow picture of difficulties faced by prospective buyers, and does not give any information on the ability to muster up a sufficient deposit.