Surveyors warn 40% fall in house sales this year

Published 19th May 2008

House prices could tumble by 7 per cent over the next year as the credit crunch continues to bite, according to a bleak forecast from the Royal Institution of Chartered Surveyors (RICS).

The surveyors’ organisation has given warning that sales will drop 40 per cent this year, unless the shortage of mortgages eases.

It says that the housing market slowdown could cause an 8 per cent fall in consumer spending.

RICS now predicts that prices will fall five per cent in 2008 and a further two per cent next year before recovering later in 2009.But RICS, which just six months ago had forecast prices to hold steady this year, has warned that it is difficult to predict the recovery of the market in the current gloomy conditions.

Knight Frank, the estate agent, was last month forced to revise its house price predictions for this year from a rise of three per cent to a fall of three per cent.

But Savills, its rival, has said that prices may drop as much as 25 per cent over the next two years unless the credit crunch is reversed by Government action.

The RICS forecast casts doubt on the current slowdown becoming as severe as that in the early 1990s, despite a monthly survey released last week that showed its members were their gloomiest in 30 years.

The new forecast from RICS coincides with a warning from Rightmove, the property website, which said that estate agents may refuse to take on more homes to sell, as the stock of unsold property on their books stacks up in the market slowdown.

The property website has warned that agents now have an average 73 properties still to sell, the highest it has recorded, and four more than a month ago.

But despite the number of unsold homes on the market, homeowners are increasingly demanding higher prices for their properties, risking further gridlock in the market. The average asking price is now a record £242,500, up 1.2 per cent in the month to May 10.

Miles Shipside, a director of Rightmove, said: “With the current mortgage famine forecast to last for two years, sellers need to focus on trying to attract the limited number of buyers who have access to funds.Some estate agents are now turning away new instructions if they are similar to the properties they already have on their books and cannot sell.”

Experts warn that properties that are too highly priced in the current market will linger unsold, and eventually sell for a much lower price than a realistically priced home, dragging down average prices.Rightmove measures asking prices only, not eventual sales prices.

The increase in amount being asked for homes on the market, reported by Rightmove, has been restricted to the south of the country. In the south west asking prices rose one per cent in a month, while the south east was up 4.2 per cent.

The asking prices of homes are now 6 per cent higher than a year ago in the South East, compared with 2.4 per cent higher in the South West and 2.2 per cent across England and Wales.

The housing market slowdown is setting in in the North and much of the Midlands, Rightmove’s monthly survey suggests. The North West showing the sharpest decline, down 2.5 per cent, while Yorkshire and Humberside and Wales, fell 2.3 per cent and 2.2 per cent respectively.

In the East Midlands prices have now dropped 0.7 per cent in the past 12 months. But the West Midlands has appeared to buck the trend, with asking prices 2.2 per cent higher than a year ago, despite falling 0.5 per cent in the last month.

In London asking prices were up 0.2 per cent in a month. The market slowdown means values have fallen in areas that were former outperformers, with asking prices in once-buoyant Kensington and Chelsea up just 6.7 per cent in year.

In the past month prices have dropped in the West London suburbs of Ealing, down 2.7 per cent, and Hammersmith and Fulham, 1.6 per cent down, but in the City of Westminster, Greenwich and Kingston-upon-Thames they were up more than 3 per cent each.

Lorna Blackwood

Source: ' The Times '

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