House sales at lowest level since 1978; RICS blames lack of available mortgages

11 November 2008 / by Rachel Mason
The number of UK home sales has hit at least a 30-year low, according to the latest house survey from the Royal Institution of Chartered Surveyors (RICS).

According to RICS, house sales have fallen to their lowest level since it first began compiling data in 1978, with the average number of completed sales per RICS member falling to 10.9 between August and October – a drop from 11.5 in September.

The area hit the worst, according to the survey, is London, where RICS members reported only six sales per agency over the past three months. In East Anglia, the average was nine. The highest level of sales was in the North East, where agents recorded 16 completed sales in the three month period.

But the sales to stock ratio – which RICS says is an indicator of market slack and a guide to future price changes – has dropped to 13.5 per cent, which is the lowest figure in almost 16 years and suggests further price falls in the short term.

RICS says the lack of mortgage deals on the market is to blame for the low level of home sales; "the general lack of mortgage finance remains a major blockage in the housing market for a large majority of would-be buyers," said spokesperson Ian Perry.

"Fortunately, many vendors have finally started to accept current market conditions and are dropping their asking prices to achieve a sale."

Nevertheless, RICS says it is optimistic that things will improve, with 20 per cent of its members expecting sales to rise by the end of the year.

"Sales should increase in the coming months as more and more sellers understand that greater realism is the only way to make that long desired move," said Mr Perry, who predicts that the Bank of England's decision to cut the base rate from 4.5 per cent to three per cent this month will help put some movement into the flagging housing market.

"Last week's interest rate cut should certainly help to support the market now that lenders have agreed to pass on the reduction to borrowers," he said.

UK house builder Taylor Wimpey said it has also continued to struggle under current conditions and said that it remains of the view that "there will not be a recovery in the UK housing market in the short term," but it also welcomes the rate cut.

"We are hopeful that if this is passed on to consumers, then it will help the market to return to stability more quickly," it said in a statement.

But the National Association of Estate Agents (NAEA) says a rate cut alone is not enough and has again called on the Government to suspend stamp duty.

"The Chancellor must realise that the housing market is not a piggy bank for his personal use - the gravy train is over and stamp duty cannot be used irresponsibly to boost his coffers," said Chris Wood, President-Elect of the NAEA.

"The bill for first time buyers has more than doubled in the last five years, making it impossible for many young people to start their own home. As it stands, stamp duty is a tax on aspiration - disappointing during an economic boom but unforgiveable in a faltering economy."

The NAEA has made repeated calls for a full revision of stamp duty and is now urging the Chancellor to take action at a time when "the stakes have never been higher."

"We now call on the Government to suspend stamp duty and hold a full review into making the system work better for the consumer," said Mr Wood.

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