Monday, November 15, 2004

Housing crash fear drives down prices (UK)

Surveyors say October was worst month since 1992 - Transactions at nine-year low as buyers suffer nerves

By Philip Thornton, Economics Correspondent

The Independent

The housing market is suffering its worst downturn since the tail-end of the 1990s property crash, a leading industry body warns today.

The Royal Institution of Chartered Surveyors (Rics) says the market is in the grip of a vicious cycle as mounting speculation of a property crash conspires to drive down prices.

It says the number of surveyors reporting a fall in prices outnumbered those seeing a rise by 41 per cent in October - the lowest reading since December 1992. Although the figure does not directly equate with a fall in property values, it is the latest in a run of industry reports to highlight a fall in prices last month.

Last week the Bank of England predicted for the first time that prices would suffer a "modest fall" over the next two to three years.

Rics says: "Additional uncertainty has been injected into the market by continued speculation over the potential for more serious declines in prices."

Individual surveyors across the country highlighted growing media speculation as a driving force behind the slowdown.

Quentin Jackson-Stops, of Jackson Stops & Staff in Northampton, said buyers had been "spooked" by adverse media comment. "Both new instructions and viewings are down and if there is continuing adverse press coverage it could make price falls inevitable," Mr Jackson-Stops said.

In Winchester, Hampshire, the UK-wide agency John D Wood said constant speculation was undermining buyers' confidence and forcing sellers to cut their asking prices.

A surveyor in Frome, Somerset, singled out the Daily Express newspaper, which has repeatedly warned of a crash on its front page, for "negative impact beyond the call of duty".

The Rics survey found that activity in the market appeared to be drying up, with transaction numbers at a nine-year low, another rise in stocks of unsold properties, and new buyer inquiries down for the sixth month in a row.

"Buyers are still nervous, which is not surprising given the quick-fire interest rate rises over the summer," Jeremy Leaf, Rics' housing spokesman, said. However, he said there was little evidence of "panic selling", and focused on "encouraging signals" from London, where surveyors are reporting a levelling off in prices. Rics said the capital traditionally provided a reliable indicator for emerging national trends. "This may be an early signal that declines are coming to an end," Mr Leaf said. "Despite the gloom, the professionals on the ground believe that confidence will not deteriorate further over the coming months as the underlying factors, jobs and the wider economy, remain stable."

Its report found that prices fell in every region bar Scotland, with the biggest drops in southern England, followed by the Midlands, Wales and northern England.

Many said that winter - traditionally a quiet time - had come early, although several hoped for a spike in the new year.

There is a growing consensus among economists that interest rates are at or close to a peak at the current level of 4.75 per cent. Several believe that borrowing costs will start to tumble in the second half of next year as falls in house prices begin to accelerate.

Mark Annett, at Scott Symonds surveyors in Witney, Oxfordshire, said: "If interest rates don't rise, all should be well. It seems that the Bank has achieved what was required - a slowdown."


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