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The balance of Chartered Surveyors reporting house price falls increased to 'near historical' levels in February and stockpiles rose to levels not seen for a decade, says RICS (Royal Institution of Chartered Surveyors) in its latest UK housing market survey.
The RICS house price balance dropped for the seventh month in succession signalling more than half a year of negative market sentiment. 64% more surveyors reported a fall than a rise in house prices, an increase from 55% in January. This figure is close to the historical low of June 1990 when 65% more surveyors reported a fall in house prices.
However, Scotland tells a different story. Here, the net balance of surveyors reporting price rises surged from 7% to 25% - 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.
Demand continued to weaken as new buyers' enquiries continued to fall - 37% more surveyors reporting a fall than a rise in new buyer enquiries, down from 35% 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.
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% in February. This is the fifth successive monthly increase in excess of 8%. 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%, down from 29%, 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.
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."
11 March 2008 © Moneyextra.com
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