House price gloom shows no sign of moving

House prices in the UK are experiencing their biggest slump for over ten years and show no sign of recovery, according to the Royal Institute of Chartered Surveyors.

The group's respected monthly survey found 41% more of its members reported price falls in the three months to October – the worst rate since December 1992.

RICS said there was a "large fall-off in activity," explaining the lowest level of sales for nine years coinciding with the sixth monthly drop in buyer enquiries.

Unsold stock on estate agents' books has increased 10% since the summer, indicating high and uncertain interest rates have scared buyers into being nervous on the market.

RICS indicated the Bank of England had been successful in reigning in runaway house prices but had perhaps gone too far in their rate decisions.

"Mervyn King presumably felt that he had to be more explicit in the summer when people were still buying. His warnings of a drop in property prices then have had the desired effect," said Ian Perry, national housing spokesman of RICS.

"But our concern now is that the pendulum is swinging too far."

Data from RICS is supported by Halifax and Nationwide figures, which reveal a modest monthly ease in loan approval.

The overall 12-year gloom on the housing market was something analysts argue should not be misplaced for a housing crash.

They said there were no signs of panic selling and that overall, confidence in economy remained high.

Many pointed to the Bank of England's report last week, hinting interest rates would not be lifted for a number of months despite the expectation of falling house prices "for a period."

Despite the prediction, RICS said there was already a sign of a leveling off in London, where property tends to be ahead of the market.

The only region currently experiencing price rises is Scotland, where prices are now beginning to level off.

Nationwide surveyors found a growing sense of optimism, reflecting the widely held sentiment that interest rates had peaked at 4.75%.

 

21st November 2004

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