The residential property market in the UK is likely to remain subdued in the coming months as lack of demand means prices are falling, the latest high profile real estate reports show.
Surveyors’ expectations for property prices over the next three months remain negative, according to the November UK Housing Market Survey from the Royal Institution of Chartered Surveyors out today (Tuesday December 14).
And prices fell by 3% in November and have now gone down in five of the last six months, according to the Rightmove index. This means that the average house in the UK lost almost £7,000 off its value.
And estate agents are predicting worse to come in 2011. Rightmove forecasts that in 2011 sellers will continue to drop their asking prices with the national average falling by up to 5%, with north/south extremes.
Surveyors’ expectations for house prices over the next three months remain negative, with a net balance of -41% expecting prices to fall. However, sales expectations are more upbeat, with 6% more predicting sales to increase rather than decrease over the next three months.
‘There was little change in the housing market in November as prices continued to edge lower and sales levels generally remained subdued. Despite some better economic data, fears over how future-spending cuts will impact on the jobs market are clearly still weighing heavily on potential purchasers’ minds, with many deciding to wait and see until the New Year. Meanwhile, the lack of mortgage finance continues to deter first time buyers,’ said RICS spokesperson, Ian Perry.
2011 though will be a good year for landlords as forced sellers, first time buyers who can’t afford deposits and fears of unemployment and interest rate rises will increase the demand for rented property.
Rightmove says that new sellers will have to drop their asking prices further during 2011, the extent to which hinges upon whether base rates rise and/or forced sale numbers increase substantially.
‘At best prices will be flat, but a drop by as much as 5% is predicted if sorely stretched lender forbearance buckles as prices fall and repossession numbers jump as a consequence,’ said Miles Shipside, a director of Rightmove.
‘Price falls on a national average basis of up to 5% are relatively minor, indeed, national average asking prices are 6.5% lower this month than they were in June. However, in areas of over supply and where forced sales are more prevalent, a more extreme re-adjustment of sellers’ price expectations will be necessary. These are likely to be more concentrated in the north of the country,’ he explained.
‘Recent price falls and some nervousness about prices in 2011, combined with growing arrears, could lead to lenders deciding it is in their best interests, and those of debtors, to go down the repossession route. If base rates increase then repossession numbers could form a much larger percentage of total sales, and at an extreme this could lead to even greater price falls than we are forecasting,’ he added.
First time buyers are in particularly short supply, as large deposits required by lenders and availability of mortgage finance keep many from getting a foot on the property ladder, according to RICS.
The report also shows that unsold properties remained on surveyor’s books for longer in November, as the average number of stocks rose to 69.5, from 67.2. Meanwhile, the average number of sales per surveyor decreased, with just 14.8 sales on average taking place over the last three months. As a result, the sales to stock ratio fell to its lowest level since May 2009.
Regionally, the West Midlands and Northern Ireland registered the most negative readings for house prices, with 67% more surveyors reporting falls than rises in both areas. The South West continues to buck the national trend as the only region to report a positive net balance for newly agreed sales.