Royal Institution of Chartered Surveyors Housing Market Survey - November 2007

RICS Economies - November 2007

Net Price Balance Most Negative Since May 2005

Newly agreed sales decline at fastest pace since April 1999
Market conditions loosest since October 2005
Price expectations lowest level since Oct 1998

Sentiment in the housing market deteriorated further in November, with the balance of surveyors turning the most negative since May 2005. For the three months to November, 40.6% more surveyors reported a fall in prices than a rise, compared to 23.4% reporting a decline in October. Falls in the price balance are being driven by weakening property demand, although supply, whilst still contracting, is not falling as quickly as in recent months.

On the demand side, heavy falls continued to take place in new buyer enquires, while newly agreed sales declined at the fastest pace this question as first included in the survey (April 1999). Past interest rate increases (this survey was conducted prior to the December MPC meeting) combined with a tightening in mortgage lending criteria are preventing many would-be buyers from getting on to the housing ladder. Buyer affordability however may improve in the coming months. The nation’s two biggest mortgage lenders have already cut their lending rates in the wake of the Bank of England’s quarter point interest rate cut earlier this month.

New instructions to sell property fell for the sixth consecutive month although the pace of decline was the most subdued so far during this period. Notwithstanding the Bank of England’s interest rate announcement this month, the economy has been showing signs of cooling in response to past interest rate increases and recent credit turmoil. At the same time, many fixed rate mortgages are beginning to revert back to market interest rates.

Sustained weakness in demand, combined with looser supply conditions is resulting in greater stocks of property listed on surveyor’s books. The stock of unsold property on surveyor’s books jumped by 8.7%, following last month’s rise of 9.7%. As a result of this, the ratio of completed sales (over the last three months) compared to the stock of unsold property on the market fell to 33.1%. Market conditions are now the loosest they have been since October 2005.

Sales expectations deteriorated slightly, though they have not breached September’s lows. However, price expectations reached the lowest level since this question was first included in the survey (Oct 1998).

Surveyors reported price falls across all regions in England and Wales. This was particularly visible in the East Midland and West Midlands, while a little less so in London and the South West. Outside England and Wales, surveyors reported broadly based price declines in Northern Ireland. Scotland was the only region in the survey where surveyors reported a positive trend in house prices. Mike Andrews,Chartered Surveyor with Manning Stainton in Leeds achoed these feelings

Prices

Property Sales

Completed property sales for the quarter to November increased slightly to 23.6% per surveyor, from 23.2 in October. On year ago levels, sales are down 16.2% compared to 15.4% in October. The annual growth rate in sales fell for the seventh consecutive month in November.

Stocks of Property

The stock of unsold property on surveyors books jumped by 8.7%, following last month’s rise of 9.7%. Average stocks on surveyors books were 71.2 in November compared to 65.5 in October and on year ago levels, they are up by 9.0%, the first increase since December 2005. David Pank, a Chartered Surveyor and Sales and Marketing Director with Manning Stainton in Leeds and Wakefield echoes this with a year on tear increase of 80%

Sales to Stock Ratio

The ratio of completed sales (over the last three months) compared to the stock of unsold property on the market fell to 33.1% in November from 35.5% in October. Market conditions are now the loosest they have been since October 2005.

Newly Agreed Sales / Expected Sales

Newly agreed sales declined for the fifth consecutive month and at the fastest pace in the survey’s history. Heavy declines took place across all regions in England and Wales, with the exceptions of the South East and South West, where falls were less dramatic.

Surveyor confidence in the sales outlook deteriorated slightly, though it has not breached September’s lows. Confidence is negative across all regions in England and Wales except for London and the South East, where it is broadly neutral, as well the South West where confidence is positive.

Expected Prices

Surveyor confidence in the price outlook deteriorated further, reaching the lowest levels in the surveys history. Confidence is negative across all regions in England and Wales, particularly in the East Midlands, West Midlands and Yorkshire and Humberside. Sharp declines in confidence took place across the board with the exceptions of East Anglia and the North West, which saw modest improvements.

New Buyer Enquiries

New buyer enquiries continued to fall heavily, although the pace of decline eased for the second consecutive month. Falls in new buyer enquiries took place across the board in England and Wales with the exception of East Anglia, where they stabilised. Particularly heavy falls took place in London, the South East, Yorkshire and Humberside and the East Midlands. Subdued falls took place in the North West.

New Instructions

New instructions to sell property fell for the sixth consecutive month although the pace of decline was the most subdued so far during this period. New vendor instructions continued to fall across the board in England and Wales with the exception of the South East and East Anglia. The sharpest falls in new instructions took place in the East Midlands and West Midlands, while subdued falls took place in London, Wales, the South West and the North West.

In Leeds and Wakefield the position appears to be the opposite with many new properties coming onto the marke for sale with estate agents in the region.