Property News - Royal Institution of Chartered Surveyors Housing Market Survey - December 2007

RICS Economies - December 2007

Price balance drops further into negative territory

• Price balance most negative since November 1992
• Declines in buyer enquiries ease back for third consecutive month 
• Sales to stock ratio lowest since August 2005

Sentiment in the housing market deteriorated further in December with the balance of surveyors turning the most negative since November 1992.  49.1% more surveyors reported a fall in prices than a rise, compared to 40.6% reporting a decline in November.  Falls in the price balance are being driven simultaneously by weakening property demand and greater supply. 

On the demand side, new buyer enquiries and newly agreed sales continued to fall although the pace of decline in both cases has eased (the pace of decline in new buyer enquiries slowed for the third consecutive month).  Although the Bank of England cut interest rates in December by 25bps and has signalled that further cuts are likely to follow, past interest rate increases along side a tightening in mortgage lending criteria, are still restraining property demand.

New instructions to sell property increased for the first time since May 2007.  Looser market conditions have been compounded by the extension of HIPs to all properties.  However, this small national rise masks important regional variations. In particular, new instructions increased very sharply in the North and to a lesser extent in London.  In London’s case this does not come as a complete surprise given the exposure of its economy to the financial services sector.  Elsewhere across England and Wales, the pick up in new instructions that was recorded in three other regions – the South East, the South West and Wales – was moderate.  New instructions fell in East Anglia, the North West, the East Midlands and the West Midlands, 

Sustained weakness in property demand combined with increasing supply is resulting in looser market conditions.  The stock of unsold property on surveyor’s books jumped by 7.1% following last months rise of 9.1% and the rise of 10.3% in October.  As a result, the ratio of completed sale (over the last three months) compared to the stock of unsold property on the market fell to 30.7% in December from 33.0% in November.  Market conditions are now the loosest they have been since August 2005.

Surveyor confidence in the sales and price outlook’s deteriorated markedly, with both measures reaching their lowest level’s since these question’s were first included in the survey (October 1998).  Surveyors reported that prices fell at a faster pace than in the previous month in all regions except for Scotland, East Midlands and the North West.  The heaviest price falls took place in the West Midlands and East Anglia, while more moderate falls took place in the South West and North West.  In Scotland, surveyor’s reported that prices are still rising, but the net balance came down sharply.  In Northern Ireland, sentiment is still strongly negative. 

Prices

Sentiment in the housing market deteriorated further in December with the balance of surveyors turning the most negative since November 1992.  49.1% more surveyors reported a fall in prices than a rise, compared to 40.6% reporting a decline in November. 

Surveyors reported that prices fell at a faster pace than in the previous month in all regions except for Scotland, the East Midlands and North West.  The heaviest price falls took place in the West Midlands and East Anglia, while the least heavy falls took place in the South West and North West.  In Scotland, surveyor’s reported that prices are still rising, but the net balance came down sharply.  In Northern Ireland, sentiment is still strongly negative.

Property Sales

Completed property sales for the quarter to December declined fractionally to 23.6 per surveyor, from 23.7 in November.  On year ago level’s sales are down by 15.6% compared to a 16.2% fall in November.  The annual growth rate of sales fell for the eighth consecutive month. 

Stocks of Property

The sock of unsold property on surveyor’s books jumped by 7.1% following last months rise of 9.1% and the rise of 10.3% in the October.  Average stocks on surveyors books were 76.9 in December compared 71.8 in November.  On year ago levels stocks are up by 18.3%, which is the highest increase since July 2005.

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 30.7% in December from 33.0% in November.  Market conditions are now the loosest they have been since August 2005 with the sales to stock ratio almost seven percentage points below the surveys long run average of 37.2%. 

Newly Agreed Sales / Expected Sales

Newly agreed sales declined for the seventh consecutive month although the pace of decline slowed to the rate seen last August.  Falls in newly agreed sales took place across the board in England and Wales with the exception of the North West.  Heavy declines were visible in the East Midlands and West Midlands, while less heavy falls took place in East Anglia, the South East and South West. 

Surveyor confidence in the sales outlook deteriorated markedly, reaching its lowest level since this question was first included in the survey (October 1998).  There were falls in newly agreed sales across England and Wales with the exceptions of the South West and London.  Confidence is lowest in the West Midlands and Highest in London. 

Expected Prices

Surveyor confidence in the price outlook deteriorated markedly, reaching the most negative level since this question was first included in the survey (October 1998).  Across every region in England and Wales, price expectations declined.  In the South West, Yorkshire and Humberside, Wales, the North West, the East Midlands and the West Midlands confidence reached survey lows.  The largest falls in confidence took place in London, the South West, and East Anglia.

New Buyer Enquiries

New buyer enquiries continued to fall although the pace of decline slowed for the third consecutive month.  Falls in new buyer enquiries took place across England and Wales with the exception of the South West, where they picked up slightly.  The heaviest falls in buyer enquiries were visible in Wales, the East Midlands and the West Midlands.  The smallest falls took place in the North and North West.  

New Instructions

New instructions to sell property increased for the first time since May 2007, and growth in new instructions is now just above the survey’s long run average rate.  However, this national figure masks important regional variations.  In particular, new instructions increased very sharply in the North and to a lesser extent in London.  In London’s case this does not come as a complete surprise given the exposure of its economy to the financial services sector.  Elsewhere across England and Wales, the pick up in new instructions that was recorded in three other regions – the South East, the South West and Wales – was moderate.  New instructions fell in the North West, East Midlands and the West Midlands although at a lesser pace than November.