House price slowdown fails to attract first-time buyers

The downward spiral of house prices in England and Wales is starting to level out and costs are unlikely to rise again soon, according to a new report.

The latest reading from the Royal Institute of Chartered Surveyors found that 32% of surveyors reported lower property prices in their area, compared to the 36% in January.

Despite the easing in the market, RICS said buyers remain cautious, highlighted in part by a 0% increase in levels of buyer enquiries.

Analysts at the group traced the buyer caution to speculation of an interest rate rise, in light of the Bank of England's seven-month decision to freeze rates at 4.75%.

As a knock on effect of the decline in the market, RICS said there is now the highest number of properties for sale since January 2003, while the stock of unsold houses is at its highest since March the same year.

"Demand conditions remain lacklustre," said the report. "Prospective buyers remain cautious over the market, influenced by talk of further interest rate rises in 2005, and contrast with speculation late last year that interest rates might have already peaked."

Surveyors added that buyers and sellers are not likely to see any significant decline occurring in the current economic climate, just as they are unlikely to see any pick up in prices or witness an increase in sales.

But they said if a rate rise is brought in by the MPC then the market is due to flatten out, even analysts say, if the rise is marginal.

Meanwhile, figures from Lehman Brothers show houses in England and Wales are overvalued by 15%.

The report from the investment bank reveals house prices are likely to fall back gradually over the next three years, declining 7 per cent between now and the end of 2007.

Meanwhile, RICS and property website Rightmove, said that Wednesday's Budget provides the Chancellor with an excellent opportunity to inject more activity into the bottom-end of the market.

"What the chancellor should do is either make genuine first time buyers exempt from stamp duty, or at least apply their tax at a lower rate," said Rightmove's Miles Shipside.

"If Mr Brown uses his fiscal lever to help first time buyers, that would definitely be welcomed by many financially hard-pressed and politically disaffected voters who just want their own roof over their heads," he adds.

RICS spokesman, Ian Perry agrees: "The RICS would like to see the Chancellor send a message of support to first-time buyers in this year's Budget by introducing a long overdue rise in the stamp duty zero rate threshold.

"We would like to see the threshold rise to £150,000, although it is unlikely to be raised to this level in one stop, given the Government's current fiscal position."

 

16th March 2005

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