A few bright spots in a dire property market

16 July 2008 / by Daniela Gieseler
Property sales have fallen to a their lowest level since records began 30 years ago, new figures by the Royal Institution of Chartered Surveyors (RICS) showed today.

RICS found that the average number of properties sold by its members in the last three months was just 15.3 – down by a third from the property peak last year and at a record low since 1978 when it started keeping records.

According to RICS, the major causes for the slump are the inability of many buyers to secure a mortgage deal as lenders have increased interest rates on their loans or require hefty deposits.

Buyers who fail to provide a deposit of at least five per cent will not even be considered for a mortgage, and the best mortgage deals are only available for those who are able to make a down payment of 25 per cent or more.

In addition, many Brits are reluctant to buy at a time when house prices are expected to continue falling. Global Insight forecasts a 26 per cent drop in house prices over the next two years, while Capital Economics predicts a fall of 35 per cent over the next three years.

"June was the worst month so far for buyer activity and the situation is worsened by a high cancellation rate due to difficulties with finance availability and a lack of buyer confidence," RICS member Richard Powell said.

"Sellers are reluctant to reduce prices and are under no real pressure to sell. Buyers are sitting and waiting. The net result is very few transactions".

However, there are some bright spots in the altogether still very gloomy picture. RICS observed that house prices were still falling, but at a slightly slower pace than in the two months before; 88 per cent of its member reported a fall, which is a decrease from 92.2 per cent in May and 94.2 per cent in April.

RICS members also reported a slight increase in the number of new buyers registering with estate agents, many of them being cash-rich "predatory buyers" hunting for bargains in the depressed market.

Jeremy Leaf, a spokesman for RICS, said: "With demand so low, would-be buyers are negotiating from a position of strength. Even in a weak market, there are always opportunities for investors and buyers to profit and some are starting to circle for bargains."

Also, the number of repossessions or 'distressed sales', with buyers being forced to sell due to unemployment or the inability to keep up with mortgage repayments, has not noticeably accelerated over the last few months.

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