Homes shortage limits price fall, say surveyors

Homes shortage limits price fall, say surveyors

A drop in house prices is being reported by almost every estate agent in Britain but a shortage of homes coming on to the market has so far limited the extent of the fall, the Royal Institution of Chartered Surveyors said today.

The monthly snapshot of the property market from the body representing estate agents found that firms reporting lower prices outnumbered those seeing increases by more than 19 to one in April, despite the spring buying season.

The RICS said that the balance of surveyors registering a fall in prices stood at a seasonally-adjusted 95.1 percentage points last month, the highest since the survey began almost three decades ago and beating the previous record of 79.4 points recorded in March. Interest from potential buyers fell for the 17th consecutive month as the credit crunch caused lenders to restrict the choice of mortgage products and tighten the conditions for getting a home loan.

The tougher climate for borrowers was underlined by Bank of England data yesterday which showed loan rates for some products had risen despite interest rate cuts. The Bank said the average interest rate on two-year fixed mortgages with a loan worth 95% of the property jumped to 6.94% in April from 6.60% in March - the highest since February 2000, a time when the bank rate was 6% compared with 5% today. A two-year fixed mortgage with a 75% loan to value rate rose to 6.08% in April from 5.80% in March and was at its highest since October, when.....continued below

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the bank rate was 5.75%.

But amid signs that its members are becoming concerned about the impact on buyer sentiment of stories about tumbling prices, the RICS said that so far the scale of price falls remained small compared with previous downturns. The RICS said that in 10 out of 12 UK regions, falls were concentrated in the 0 to 2% range, although in the south-east and East Anglia there were more declines in the 2% to 5% bracket. In London 18% of surveyors said prices were unchanged over the quarter and 41% said they had fallen by up to 2%.

The RICS said there would be shortages of supply while mortgage arrears remained low and employment prospects remained good. In the downturn of the early 1990s, there was a sharp increase in the number of home repossessions, which were sold at a discount and thereby depressed prices.

Ian Perry of the RICS said: "Although most surveyors are now seeing price declines, the extent of the fall is, at this stage, quite modest. The real issue is the number of housing transactions. This has very real implications ... for the ... wider economy." Some RICS members blamed the media for the price falls. "There is no crash, but the media is causing one," said Richard Sayer, of Rook Matthews Sayer in Alnwick, Northumberland.

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