by Mark Johnston
Augusts house price results are showing their lowest levels in 15 months. A recent survey has revealed that there has been a drastic reduction in the number of potential buyers in the market due to the Banks and Building Societies creating a shortage of finance. The Royal Institute of Chartered Surveyors has suggested that its members have reported a greater number of price falls in August when compared to the overall number of increases. They believe that it comes as a result of increasing number of sellers putting their property on the market whilst the overall number of potential buyers has reduced.
The Council of Mortgage Lenders (CML) have reported that the tightening of lending policy’s by mortgage providers especially among first time buyers has led to a decline in overall loan volumes. Although there was a marked increase in the number of mortgages agreed in previous months, the number of first time buyers getting home loans fell by around two percent.
The report by the Royal Institute of Chartered Surveyors suggested that sales would pick up as they have seen almost a twenty percent increase in surveyors expecting increases. Some are suggesting that the potential house price crash may tempt more buyers onto the market but most market analysts are expecting a slight dip rather than a crash.
A spokesperson for the Royal Institute of Chartered Surveyors said: “The latest set of results suggests prices in many parts of the country may be slipping but this does appear to be encouraging hopes amongst surveyors that sales levels could begin to pick up as a result. That said, there can be little doubt that the restrictive attitude to the provision of mortgage finance will continue to limit transaction activity in the market,”.
Many are finding it hard to make realistic predictions in what is a very difficult and changeable market. The market has totally changed in the last twelve to eighteen months.
Ed Stansfield, chief property economist at Capital Economics explained: “If you look at house prices versus indicators like prices or income, we reckon that prices are still 20 to 25 per cent too high. The real question is whether or not prices can come down without derailing the economic recovery. We’ve got a falling market and there is little that can be done in terms of reducing interest rates to help encourage activity. And all this is before the impact of the planned fiscal tightening is seen.”
That said, the market is starting to see some green shoots as confidence is returning to the UK. The Nationwide property index showed that the mood amongst borrowers was changing. The index increased to a similar level that was seen a year ago, from 56 to 61.
Mark Saddleton, Nationwide’s head of economic and market analysis said: “Downward pressure is likely to be placed on confidence in the shape of speculation over public spending cuts, a stuttering housing market and a difficult job market. September’s results should help to paint a clearer picture as we move into the final quarter of 2010.”
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