House prices set to fall further, report claims

Jan 5 2009 by Henryk Zientek, Huddersfield Daily Examiner

HOUSE prices look set to fall further 10% during 2009, a report has claimed.

The forecast by the Royal Institution of Chartered Surveyors said continuing caution among lenders and a worsening economic climate was likely to result in house prices falling by about 10% over the next 12 months.

However, it predicted a 10%-plus increase in sales during 2009, based on the evidence of recent RICS surveys suggesting market activity may have bottomed out.

It said new buyer enquiries had climbed to their best level since October, 2006. The key to turning these enquiries into sales would be availability of funding. Mortgage approvals are now running at about 30,000 a month against 129,000 two years ago.

The RICS forecast said house building was set to continue declining throughout 2009. New house starts for 2008 were unlikely to exceed 110,000 – lower even than the figure recorded for the recession of the 1990s. The RICS said new starts could be as low as 80,000 in 2009.

Raymond Butterworth, of estate agency Boultons in Huddersfield, said local house prices fell throughout 2008 and by about 5% in the final quarter of the year. He said there was no reason to think that trend would change in the opening months of 2009.

Mr Butterworth said that while lending rates were very low and retail prices were low, people were worried about job security and were reluctant to spend on luxury items – such as a move up the property ladder.

“Interest rates on mortgages are very attractive,” said Mr Butterworth. “But we need to see an improvement in the loan-to-value ratio – the amount banks and building societies are prepared to lend to bring back the first-time buyers.”

But Mr Butterworth said: “We are still selling houses. While national figures suggest estate agents are selling only four or five properties a month, we have achieved sales of 25 over the past three months as a result of realistic pricing by sellers and inventive deals to match buyers and sellers – such as part-exchange and house swaps.”

RICS Yorkshire and Humberside spokesperson Bruce Collinson said: “The RICS national figures are spot-on for Yorkshire, too. While the market has seen an unprecedented slowdown, there is some hope for 2009.

“Competitively priced property will find a buyer as long as more mortgage funding becomes available.

“My concern for the future is that very few if any new houses are likely to be built in the next two years unless the Government cuts some of the red tape involved.

“This will put an increasing burden on social housing and lead to greater housing shortages, pushing up prices and perpetuating the boom-bust cycle.”