The latest RICS UK Housing Market survey says across the UK, completed transactions were highest in the East Midlands and Yorkshire and the Humber (averages of 19 and 18 respectively). East Anglia recorded the lowest level of transactions, with an average of just 10 per surveyor.
As a result of adverse weather, estate agents reported the number of agreed sales in December fell to a net balance of -15 per cent (from -14). Worries over the economy remain a concern for some buyers, while the lack of available mortgage finance continues to keep many prospective purchasers out of the market.
More positively, surveyors’ expectations for sales over the coming months edged up, with eight per cent more expecting sales to increase rather than decrease, up from six per cent in November. Many respondents suggested that the market would begin to pick up again in the Spring.
Despite this slightly more encouraging outlook, lack of supply to the market continues to be an issue. New instructions fell from a net balance of -4 to -14, as potential sellers waited until the New Year before putting their property on the market.
New buyer enquiries, which signal demand for property, fell for the seventh consecutive month. Surveyors continue to report that lending constraints, particularly to first-time buyers, remains the biggest barrier to any strong improvement in the market.
Pessimism still surrounds current house prices, with 39 per cent more surveyors reporting prices fell rather than rose in December, although this is an improvement from -44 per cent during the previous month. Expectations for house prices over the next three months saw 29 per cent more surveyors predicting prices would fall than rise (from -41 per cent more in November).
Moreover, the closely watched sales to stock ratio, a key guide of future price changes, stabilised, moving to 21.5 (from 21.3) per cent, suggesting that after recent declines, house prices may begin to steady over the next few months.
RICS spokesperson, Jeremy Leaf said:
"Although bad weather hit the housing market during December sales levels have remained stable. While lack of supply, and more importantly demand continues to impact heavily, surveyor sentiment does appear more positive for the coming months.
"The key issue now is mortgage finance. However, with commentators suggesting lending constraints are unlikely to be eased, it is hard to envisage a meaningful increase in sales levels in the near term."
David Newnes, estate agency managing director of LSL property services, owners of Your Move and Reeds Rains said “The last months of 2010 saw a flattening of house prices and this looks set to continue through 2011. The public spending cuts, along with the possibility of rising interest rates are weighing on the minds of lenders, who have lent less money to fewer borrowers, which has caused a finance drought. Sellers know this and have been holding off bringing properties to the market, hoping for prices to rise later in the year. It largely depends on lenders, who are the gatekeepers of demand. If they are convinced that borrowers’ finances in the coming year will remain healthy, they are likely to increase the quantity and value of their loans and dispel the pessimism that the RICS surveyors seem to be feeling.”
Andrew Ellinas, Director at Sandfords, comments:
“Since the peak of the market in 2007, stock in prime London has fallen by 50%, which has had the effect of stabilising prices in areas such as Marylebone and Regent’s Park. Demand is such that we are selling some properties before they are advertised and the average length of time a property is on the market is down to just seven days.
“The resilience of the market continues to attract buyers who see prime London as a safe long term investment. International buyers currently account for half of all property purchases in these areas and we expect this to increase as the Euro comes under renewed pressure.
“While the majority of property purchases in the UK are dictated by the availability of mortgage finance, 90% of all purchases in prime London are by cash-rich buyers. The small number who do use finance generally have no problem accessing mortgages at the very best rates and are often tempted to do so in order to boost their investment for little additional cost. Subdued lending levels will therefore have little impact on property prices in prime central London.
“The RICS Housing Market Survey, like many other house price indices, does not reflect the performance of micro-markets, instead opting for sweeping generalisations that fail to take into account prime London’s property type and buyers that set it apart from other UK cities.”
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