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RICS COMMENT ON HALIFAX HOUSE PRICE DATA AND THE BANK OF ENGLAND INTEREST RATE DECISION

Commenting on Halifax house price data, Matthew McKaig, Director of RICS in the West of England, said:

"The drop in the Halifax house price index in February provides further evidence of the pressure on the residential property market at the present time. With lenders scaling back on loan to value ratios as well as being increasingly reluctant to advance finance to higher risk borrowers, the level of housing transactions is continuing to slide. This adverse trend now appears to be filtering through into prices. 

"We see little reason for this pattern  to be reversed in the near term. Indeed, survey evidence suggesting that companies may be starting to cut back on recruitment could exacebate the weakness in property prices over the coming months.The kitemark proposal for mortgages likely to be announced in next week‘s Budget by Alistair Darling may gradually help improve the financing environment but it will take some time before this provides any real support first time buyers looking to take their first steps on the property ladder." 

Commenting on the Bank of England interest rate decision, Matthew McKaig, Director of RICS in the West of England, said:

"The Bank of England predictably left base rates on hold today. The RICS believes that this was the appropriate decision  following the lowering in rates in both December and February. Although the housing market is continuing to weaken,  other parts of the economy are displaying rather greater resilience at this stage. Concerns that rising food and energy prices will become more entrenched in inflation expectations is meanwhile a serious risk which can‘t be discounted too lightly. 

"That said, it would be highly unusual if the impact of a credit contraction on the scale currently under way was to be limited to just the property market. We suspect that it will gradually infect other parts of the economy and eventually lead the Bank  to cut base rates further. Our judgement is that the next move will be in May."

ENDS             6th March 2008

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