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STOCK RISE AS SENTIMENT DROPS IN THE SOUTH WEST

RICS UK housing market survey, February 2008

The balance of Chartered Surveyors reporting house price falls increased to near historical levels in February and stock piles rose to levels not seen for a decade, says RICS‘ UK housing market survey published today (11 March 2008).

The RICS house price balance dropped for the seventh month in succession signalling more than half a year of negative market sentiment. 64.1 percent more Chartered Surveyors reported a fall than a rise in house prices, an increase from 54.7 percent in January. This figure is close to the historical low of June 1990 when 64.5 percent more Chartered Surveyors reported a fall in house prices.  However, Scotland tells a different story. The net balance of surveyors reporting price rises surged from 7 to 25 percent – a significant jump in the current economic climate, indicating that Scotland still remains the most buoyant market in the UK. Although monthly data can be volatile, this relatively healthy trend is broadly consistent with economic data coming out of the country.

In the South West house prices declined for the sixth consecutive month and at the fastest pace in the survey‘s history with 68 percent more Chartered Surveyors reporting a fall than a rise in prices compared to 52 percent more reporting a fall last month.

Demand continued to weaken as new buyers‘ enquiries continued to fall.  37 percent more Chartered Surveyors reported a fall than a rise in new buyer enquiries, down from 35 percent in January. Many would-be-buyers are either struggling to raise the necessary finance to precipitate a move or are exercising caution in light of current economic uncertainty.  However, price falls are being driven by weak demand rather than an influx of new supply as the balance of surveyors reporting new instructions to sell property remained in negative territory. While employment conditions remain strong, homeowners are under little pressure to sell.

New buyer enquiries in the South West fell moderately, but at a slower pace than in the previous month with 6 percent more Chartered Surveyors reporting a fall than a rise.  Growth in new vendor instructions increased for the third consecutive month and at the fastest pace since March 2005 with 26 percent more Chartered Surveyors reporting a rise than a fall.

This weak trend in demand is still having a visible impact on the market despite a lack of supply. The stock of unsold property on surveyors‘ books jumped by more than 8.5 percent in February. This is the fifth successive monthly increase in excess of 8 percent. Currently the average level of unsold property per surveyor stands at 92 – the highest level since October 1998 when the average figure per surveyor was 93.  As a result the ratio of completed sales compared to the stock of unsold property on the market fell to 26.5 percent, down from 28.7 percent, and is the lowest number since September 1996.

Amidst the gloom, sales expectations turned positive for the first time since last June and price expectations improved slightly for the second consecutive month.  Confidence in the price outlook in the South West declined marginally and remains quite depressed but it is still higher than in December 2007 with 49 percent more Chartered Surveyors reporting a fall than a rise.  Sales expectations moved back into positive territory and reached the highest level since November 2007, but this is still below the survey‘s long run average with 8 percent more Chartered Surveyors reporting a rise.

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

Peter Radice of Peter Radice Chartered Surveyors and Estate Agents in Taunton, Somerset said: “Conditions are still subdued.”

Keith Metcalfe of Metcalfe‘s in Torquay, Devon said: “The latest interest rate change has had little effect.  Buyers are cautious and negative press reports have contributed to their coolness.  Sales are being achieved where asking prices have been realistically set.  We look forward to a traditionally busier period during the Spring.”

Paul Knight of Paul Knight Chartered Surveyors in Street, Somerset said: “After a strong uplift in new instructions in January and February, the rate of increase has subsided.  Appropriately priced property is attracting interest, but some vendors are still ‘in denial‘ about the current strength of the market.  Many first time buyers are unable to secure high loan to value ratios which has unsettled the lower end of the market.”

Roger Punch of Stags in Plymouth, Devon said: “Reasonable sales levels in February, higher than last year, give optimism, but there is still a reluctance to bring properties to the market.  We are becoming increasingly confident that the year will provide a good market but accurate (and sometimes modest) pricing remains a pre-requisite for success.”

David Dark of Seldon Ward & Nuttall in Bideford, Devon said: “The market has become very price sensitive.  While recent interest rate welcome, further reduction needed to have an impact on the market.”

Jeffrey Cole of Cole Rayment & White in Wadebridge, Cornwall said: “There are just a few signs that people want to get moving.  It is still very difficult to agree sales with low offers, but with new instructions at more realistic prices and fresh stock we are hopeful of increased sales in the next couple of months.”

W Edmonds of TRG Lawrence & Son in Yeovil, Somerset said: “The gap between offers received and vendors expectations is sometimes impossible to close.  In a fairly dreary market, HIPs are nothing but a major inconvenience.”

William Morrison of Knight Frank in Exeter, Devon said: “Confidence is an issue with both buyers and sellers.  Lack of stock may be the issue this year.”

Robin Thomas of Strutt & Parker in Exeter, Devon said: “Confidence is beginning to return for both buyers and sellers and is now leading to more viewings, offers and sales.”

Simon Cooper of Stags in Exeter, Devon said: “We had a very busy January and expected that trend to continue into February.  However, despite an increase in the number of viewings from the same month last year, we are finding that purchasers are reluctant to get off the fence.  Those who do offer are making low offers.  That said, we are getting a good level of interest in any realistically priced new instructions.”

Ray Saunders of Webbers Property Services in Braunton, Devon said: “Shortage of supply.  Shortage of new instructions.  Enough quality buyers to do business.”

Commenting on the Bideford, Devon market, Mr Saunders said: “Still uncertainty by press reports about the housing market, but business is starting to improve.”

Andrew Luxton of Stags in Honiton, Devon said: “Lots of instructions, lots of viewings, but low offers from non-proceedable applicants is the only response.  However, there are encouraging signs for the spring.”

Ian Perry of Perry Bishop & Chambers in Cirencester, Gloucestershire said: “Volumes are quietly increasing with prices remaining tight.”

Joe Hiram of Hamiltons Chartered Surveyors in Maisemore, Gloucester said: “A little more buoyancy appears to be coming back to the market, with an increase in instructions and viewings over the last 3-4 weeks.”

Neil McAndrew of Connells Estate Agents in Chippenham, Wiltshire said: “Due to lenders‘ criteria many buyers are unable to secure finance at 100%- 75% which has reduced demand.”

David McKillop of McKillop & Gregory in Salisbury, Wiltshire said: “A much better month than anticipated.  We took a strong line on bringing prices down on many properties by up to10% and this caused a market increase in viewings, offers and sales.  In fact, we have beaten last February‘s figures for sales and instructions.  Vendors are being more sensible with values, but there are still a large number of properties not generating any enquiries at all.  Confidence levels are improving, but there is still a dearth of first time buyers in the market.”

Graham Waterton of Strutt & Parker in Salisbury, Wiltshire said: “Activity remains reasonable, particularly at the higher end.”

Emma Bishop of Strutt & Parker in Moreton-in-Marsh, Gloucestershire said: “February has seen confidence visibly return to the market, with several good sales being agreed.  Very little quality stock is coming to the market yet, which seems to be underpinning confidence.”

Mark Annett of Mark Annett & Company in Chipping Campden, Gloucestershire said: “The danger is everyone will talk the market into recession.  At the moment, it is hard to tell what is going to happen over the next three months.  It is not a time for sweaty palms.”

Colin Bowden of Dickinson Bowden in Dorchester, Dorset said: “Still quiet - more people going onto the mailing list and a few new bits to sell, but next to nothing in the pipeline, so it is not a good time for a small company such as ours.  Possible redundancies - quite a few agents locally have let staff go.”

Julian Bunkall of Jackson Stops & Staff in Dorchester, Dorset said: “After the pre-Christmas blues, the market is slowly coming back with some encouraging sales and an increase in enquiries.  If only the media would stop their negative reporting, the housing market can settle down.”

Ben Marshall of Woolley & Wallis in Shaftesbury, Dorset said: “Interest rate reductions have helped as has the onset of Spring.  Still patchy but the market is improving.”

Richard Keenlyside of Gilyard Scarth in Shaftesbury, Dorset said: “Unusual trend as instructions are good, viewing levels erratic and sales achieved on only the competitively priced houses.  Difficult trading times but sales are achievable.”

Oliver Miles of Oliver Miles in Swanage, Dorset said: “Less activity than January, but better than November and December.  With Spring approaching and hopefully lower interest rates, the doom-mongers may be proved wrong.  There is still a shortage of new instructions and HIPs are partially responsible.  Many vendors doubt the usefulness of the packs!”

John Cowley of Crisp Cowley in Bath, Somerset said: “The quarter percent reduction in interest rates was not enough to encourage buyers who now have a wider choice available.  Property stock levels are good.  Activity has reduced and HIPs are still having a negative effect.  Further rate reductions should help demand.”

Michael Joyce of Cooper & Tanner in Frome, Somerset said: “January and February have been above average when looking at comparisons over the past five years.  House sales are entirely price driven, buyers will buy as long as the price is not over what it should be, even by a couple of thousand.  Overall, vendors are between 5-10% too high in their expectations.  Get them to see sense and the property will sell.”

Stephen Morris of Davies & Way in Keysham, Bristol said: “A reasonably active market with grounds for future optimism, provided price expectations are ‘managed‘.”

 RICS spokesman, Ian Perry, said:

“Confidence in the market is clearly having an effect on prices. A combination of a lack of available finance and weakening demand is causing a slow drop in capital values. While there is very little new supply coming onto the market, it is unlikely that there will be significant price drops in the short term but the build up of unsold stocks will encourage buyers to negotiate lower asking prices.”

ENDS

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