The average number of transactions per surveyor fell further in July as a lack of mortgage finance continued to weigh heavily on the market.
However, sales expectations have improved, driven by sellers beginning to offer more realistic asking prices says RICS’ UK housing market survey published 12 August 2008.
The RICS house price balance improved slightly for the third consecutive month but still remains at a significantly low level. 83.9 percent more Chartered Surveyors reported a fall than a rise in house prices, a decrease from 86.9 percent in June.
The inability of many to secure mortgage finance is reflected in the collapse in transactions.
Demand remains weak with the balance of surveyors reporting new buyer enquiries still at a low ebb. Last month, new buyer enquiries improved again with 27 percent more Chartered Surveyors reporting a fall than a rise compared to 35 percent in June and 50 percent in May.
In June, surveyors reported that ‘predatory buyers’ were bargain hunting for property. This month, surveyors report that ‘realism’ has returned to the market with many sellers dropping asking prices to more realistic levels.
New instructions to sell property edged closer to positive territory with three percent more Chartered Surveyors reporting a fall than a rise, up from 13 percent in June.
The current period of economic weakness has led to higher levels of unemployment but the latest repossession figures still remain well below the levels seen in the early 1990’s.
RICS spokesperson Ian Perry said: “The lack of mortgage finance has brought the housing market to a virtual standstill with first-time buyers rapidly becoming an endangered species. Going forward, there are signs that sales activity might pick up a little as sellers start to re-evaluate unrealistic asking prices.
“However, the current confused messages from the Government regarding stamp duty risks damaging any returning confidence and may discourage mobility.”
The average homebuyer put down a 22 percent deposit in June, up from 20 percent in May, according to the Council of Mortgage Lenders (CML). The majority of lending continues to be on conservative terms, as lending criteria have tightened in response to the shortage of funding and current market conditions.
Gross lending decreased slightly to £23.6 billion in June, down 4 percent from May and 32 percent lower than June last year. The largest share of gross lending was remortgaging (44 percent) with 75,000 loans worth £10.3 billion in June. Loans for house purchase accounted for 30 percent of gross lending with 47,000 loans worth £7 billion.
While all parts the mortgage market are suffering a reduction in business volumes, the majority of mortgages continue to be obtained through an intermediary. The credit crunch had a particularly marked effect in the first quarter of 2008, when there was an increase in the proportion of borrowers seeking the advice of an intermediary.
In the second quarter of 2008, 78 percent of first-time buyers and 61 percent of home movers used an intermediary to obtain their mortgage.
CML head of research, Bob Pannell said: “Mortgage lending activity remains relatively weak and will decline further in the coming months as a result of funding constraints and lower consumer demand. “The majority of lending continues to be to people with larger deposits, which is prudent for borrowers and lenders in a slowing housing market.”
