(1888PressRelease)
May 22, 2008 - According to a report from the Royal Institution of Chartered Surveyors (RICS) issued on Monday, house sales could fall by 40% this year. Such a drop would mean the biggest contraction in the housing market on record, and could reduce consumer spending by 8%.
The slump is attributed to the huge difficulties faced by potential buyers in obtaining mortgages, as a result of the fall-out from the credit crunch which resulted in banks and building societies withdrawing thousands of mortgage deals, imposing stricter lending criteria and raising their interest rates.
Over the last six months, the number of mortgage deals available has fallen by around 56%, to just 16,000, according to Mortgage Monitor.
The report said that the number of house sales could plummet by some 400,000 to around 600,000 and warned that the second half of the year would be particularly grim for the housing market. This follows figures showing that the number of loans for house purchases fell to 142,000 in the first quarter of this year, the lowest figure on record since 1975.
Analysts are warning that such a large decline in house sales could impact the wider economy and threaten a recession, as the knock-on effects will be felt by companies producing white goods, furniture, and other household products, as well as by removals firms, mortgage advisers, solicitors specialising in conveyancing, and so on. Already, thousands of estate agents have faced redundancy.
Repossessions are also expected to rise. At risk are more than 1.4 million home owners whose fixed-rate or tracker mortgages will come to an end this year, leaving them to face much more expensive loans or, in the worst-case scenario, unable to meet their repayments at all. According to RICS, house repossessions are expected to reach 43,000 this year, up from 27,000 in 2007.
RICS has predicted a fall in house prices of around 5%, a more modest decline that some other analysts’ predictions of 10% or even 20%.
Notwithstanding the fall in prices, it appears that many sellers are not lowering their asking prices in accordance with the market. A report this week by property website Rightmove found asking prices up 1.2% in a month, to a high of £242,500 in May. However, these figures are being skewed by a flood of expensive properties on to the market in the South East, and asking prices in many other areas were down. “Unless sellers adjust their asking prices to the realities of the market, and accept that conditions are unlikely to improve for a couple of years, they may find themselves stuck with unsold and unsellable properties,” said Lawrence Smith of Decision Homebuyers.
For press enquiries, please contact Phil Rendall on 020 7099 9026
Email: phil ( @ ) dhbuyers dot co dot uk
Web: www.decisionhomebuyers.co.uk
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Decision Homebuyers carries out daily surveys of the national media to provide up-to-date news and commentary on the UK property market.
