Low prices bring buyers back

The balance of surveyors reporting falling rather than rising prices improved from 75.8 to 73.5 in December, the least negative figure since February 2008 says the new report from the Royal Institute of Chartered Surveyors (RICS).

RICS has said the depressed prices represent the large number of stock on agents’ books relative to the number of interested buyers, although new buyer instructions are edging up, say surveyors: the number of regions recording an increase in new instructions in England and Wales now stands at six out of ten, the report states.

These will have been prompted by cuts in the base rate and increased affordability, RICS says. On the other hand, completed sales figures have been falling, as buyers and vendors are still wary of each other in the current market.

Commentators see the report as evidence that the house price correction will not yet end in 2009: ‘The rise in buyer enquiries initially seems at odds with the drop in surveyor optimism,’ said Ed Stansfield from Capital Economics. ‘One possible explanation is that sellers’ increased willingness to accept offers has been matched by buyers’ determination to make maximum use of their strong negotiating position. If so, then sellers’ and buyers’ valuations for property may still be some distance apart.

‘In any case, with sales at such a low ebb, the rise in buyer enquiries will need to be sustained for quite some time before a recovery takes hold. With the recession now gathering momentum we would not be surprised to see buyer enquiries fall back in the months ahead, especially as lenders are continuing to tighten lending criteria and pass-on only part of the cuts in official interest rates to new borrowers. In short, the house price correction has at least another year to run.’