Sentiment in the housing market deteriorated again throughout March, says the latest housing report from the Royal Institute of Chartered Surveyors as the net balance of surveyors reporting falling rather than rising prices declined to 78.5% compared to 65.7% the previous month. These falls are being driven by weakness in demand which reflects the lack of credit being provided for would-be buyers RICS adds.
New buyer enquiries declined for the sixteenth consecutive month, and there was also a corresponding drop in newly agreed sales which fell 20% year-on-year.
Sales expectations turned negative again in March, having turned briefly positive in February, but prices expectations have also fallen, the report says.
The sharpest falls took place in the East Midlands and East Anglia, while less heavy falls took place in the North West, Wales and London and in Scotland house prices are still rising, albeit moderately so. RICS spokesman Jeremy Leaf said: Sentiment is at a very low ebb and will continue to remain depressed while the economy suffers from this unique liquidity blight.
The slowdown in prices is directly attributable to a lack of available finance which has hit demand. However, until new supply increases dramatically a significant crash remains unlikely. The next six months will be a crucial period for homeowners.
But would-be buyers with larger deposits may see this market as an opportunity to acquire property in areas to which they could not previously aspire as recently as the end of 2007.
Economists are unsure what lies at the root of the slowdown, but are sure that a price correction is fully underway. Ed Stansfield from Capital Economics said: It is hard to know to whether weak buyer enquires are a reflection of the weakening economic and house price outlook, or whether the reduction in mortgage credit is to blame. Both are likely to have been important. And with the stock of unsold property at a decade high, while tighter lending criteria are curtailing the purchasing power of buyers who are still active, further house price falls seem inevitable.
The contrast between the weakness of the housing market and data which suggest that the wider economy is slowing, but still relatively healthy, is striking. In our view, it illustrates just how important looser credit conditions have been as a driver of house prices. With the economy poised to slow sharply the significant correction in house prices we have long warned about now seems to be underway.