Wednesday, March 16, 2005

Panic selling as house prices slide (UK)

By Lorna Bourke, Money Columnist

New property coming onto the market has risen to the highest level since May 2003, according to the latest housing market monthly survey from the Royal Institution of Chartered Surveyors (Rics).

It looks suspiciously like sellers panicking as they see house prices on the slide. 'Buyer activity is still limited,’ said Rics, 'while the number of sellers continues to increase moderately, resulting in a significant increase of property on surveyors' books, which is up 32% over the past year.'

February saw a small increase in the number of agreed sales, although completed sales slipped slightly. Sales are down 33% on the same month of last year. The number of new queries from potential buyers is unchanged. Concerns over another increase in interest rates are holding back demand, the report says, despite the generally strong economy and labour market.

The ratio of completed sales to the numbers of property on estate agents books fell to 27%, its lowest level since 1996, before the current boom got under way. The long-term average is 37%. In other words, buyers are holding back expecting prices to go lower, and properties are sticking.

'More people are waiting on the sidelines as a result of renewed uncertainty over interest rates,' said Ian Perry of Rics. 'With the influx of property on the market, they are now spoilt for choice and can afford to be noncommittal, signifying a turnaround from the days when it was a seller's market.'

The uncertainty is likely to continue for some months, as the Bank of England is unlikely to raise interest rates before the expected May election. And much depends on the price of oil. If this continues to stick at over $50 a barrel, it will inevitably bring rising costs for any business which has a product to distribute, and inflation will be the inevitable result. This could mean still more interest rate increases, in addition to the expected 0.25% in mid-May.

The Rics survey reports house prices continuing to fall, although they eased to the lowest pace in five months, with 32% of chartered surveyors reporting a fall in house prices, down 4% from last month. With the growing choice of available property for potential buyers, prices are likely to remain restrained, with surveyors anticipating modest price falls over the next few months.

Price declines were greatest in the West Midlands, followed by the South East and East Anglia. London remains unchanged while price falls eased in the South West and Wales. Northern England continues to see moderate declines while Scotland is still enjoying price rises.

Like many others in the property business, Rics is calling for concessions on stamp duty in tomorrow's Budget. 'Rics would like to see the chancellor send a message of support to first-time buyers in this year's budget by introducing a long overdue rise in the stamp duty zero rate threshold. We would like to see the threshold rise to £150,000, although it is unlikely to be raised to this level in one step, given the government's current fiscal position.'

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