House prices dropped for the second consecutive month within the South West, but lower prices are leading to a rise in sales expectations, says the latest RICS UK Housing Market survey (14 September 2010).
26 per cent more chartered surveyors reported prices falling rather than rising during August in the South West, compared to 32 per cent nationally – the biggest negative reading since May 2009. This downward trend in prices continues to be driven by a combination of increased supply and a moderation in demand from buyers. Regionally, surveyors are now reporting prices slipping in all regions covered in the survey apart from Scotland.
Meanwhile, the balance of newly agreed sales also fell, from +11 to -7 in the South West and to -20 across the UK, the lowest reading since August 2008. However, future expectations for sales have started to pick up; 17 per cent more surveyors expect sales to rise in the South West over the next three months, up from a negative two per cent in July. This rise in sentiment may be attributed to the view that a dip in house prices will begin to tempt more buyers back to the market over the coming months.
New instructions, which indicate supply to the market, showed 10 per cent more surveyors reporting a rise in instructions rather than a fall in the South West, down from last month’s reading of 26 per cent. This suggests the initial surge of property to the market after HIPS were abolished has now started to fall back. Buyer demand, measured by new buyer enquiries fell slightly in the region from -5 to -6 per cent, compared to -10 nationally which is the lowest reading since January 2010. Significantly, the gap between these two series, which is the best lead indicator of future prices, has narrowed for two successive months.
The average number of sales per surveyor remained broadly unchanged at 14 in the South West while properties on surveyors’ books fell slightly, taking the figure to 59 in the region and 67.8 across the UK. As a result, the sales to stock ratio – a key indicator of future house price inflation edged up to 24.7 per cent across the UK.
Looking ahead, surveyors’ expectations for house prices over the next three months continue to deteriorate, with 34 per cent more expecting prices to fall rather than rise in the South West. This is down from a net balance of 25 per cent in July.
Tim Maggs, from Maggs & Allen and RICS South West spokesperson, commented: “The latest set of results suggest prices in many parts of the country may be slipping but this does appear to be encouraging hopes amongst surveyors that sales levels could begin to pick up as a result. That said, there can be little doubt that the restrictive attitude to the provision of mortgage finance will continue to limit transaction activity in the market. Looking forward, our price indicators are telling a mixed story which is consistent with the uncertainty hanging over the economy, the low level of interest rates and the continued lack of new house building.”
