The Royal Institute of Chartered Surveyors has published its predictions for the property market in 2008, which on the whole look very positive. Crucially, RICS does not believe that any drop in house price will be extended in duration as it expects base rates to be lowered to 5% in the first half of 2008. It is also significant that new instructions to sell have continued to slip back, a result consistent with a firm employment picture. As in 2005, unless there is a sharp rise in new instructions to accompany the drop in new buyer enquiries, RICS believes it unlikely there will be a great fall in house prices.
Repossessions will rise from 30,000 to 45,000 amounting to 123 repossessions per day as mortgage resets begin to bite, the Institute predicts – a number well below the high water mark of the early 1990s when repossessions rose to close to 80,000. If labour market conditions remain generally firm, an influx of supply from homeowners forced to sell by increases in their mortgage repayments seems unlikely, the report says.
RICS also believes there is strong pent up demand from first-time buyers who have been awaiting an opportunity to access the housing market. Should prices soften to any extent, RICS expects that many first time buyers will attempt to capitalise where they have been previously squeezed. In a climate with strong employment conditions, this should provide a boost to a flagging market.
Buy-to-let investment could slow into 2008 as the range of mortgage products diminishes in light of the credit crunch. But the research shows that there is little evidence of widespread sales of investment properties taking place.
RICS chief economist, Simon Rubinsohn said: ‘2008 will prove a difficult year for the housing market, but with falls likely in the base rate, the housing market should be provided with a stable platform. The effect of the credit crunch will dissipate slowly meaning that those seeking to obtain finance in the first half of 2008 may struggle.
‘However, the employment picture should remain firm throughout the year, helping to prevent significant numbers of repossessions and the subsequent influx of supply into the market. This should ensure that house price growth remains broadly flat over the course of the year.’