Page last updated at 12:30 GMT, Tuesday, 11 November 2008

Mortgage squeeze 'stifles' market

For sale signs
More Rics members now expect sales to increase

A lack of available mortgages is "stifling" the housing market, according to the Royal Institution of Chartered Surveyors (Rics).

It reported that the number of UK home sales had fallen to at least a 30-year low over the past three months.

The report came as figures from lenders showed the number of loans for house purchases in the UK had dropped by 15% in September compared with August.

That was 57% lower than September 2007, the Council of Mortgage Lenders said.

The government's own house price survey, also published on Tuesday, showed that UK property prices had fallen by 3% in the three months to the end of September.

Prices were 5.1% lower in September than the same month a year ago, with the average home worth 208,583.


The Rics survey found that average completed sales per Rics member had fallen to 10.9 between August and October, the lowest level since the body first compiled the data in 1978.

Housing statistics
57% fewer loans granted for house purchases than a year ago - CML
10.9 properties sold on average by chartered surveyor estate agents in the past three months - Rics
5.1% drop in annual house prices in the UK - DCLG

This affected house prices, with 84% of its members reporting that prices had fallen between August and October, while 14% said prices had been level and 2% had seen a rise.

Rics spokesperson Ian Perry said last week's decision by the Bank of England to cut interest rates to 3% from 4.5% would help to boost sales.

"Even so the general lack of mortgage finance remains a major blockage in the housing market for a large majority of would-be buyers," he said.

This was backed up by the CML figures, also released on Tuesday, that showed 35,000 loans for house purchases had been granted in September, down from 41,000 the previous month.


"The government should consider what other measures can be brought forward to enable the market to transact more easily," said CML director general, Michael Coogan.

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

Ian Perry, Rics

"Banks and building societies do want to support homeowners, but they have limited funds available and are, quite reasonably, taking a prudent approach to risk.

"If the pricing and volume of interbank lending continues to improve, this should help the flow of mortgage lending."

The figures reflect the uncertainty of the time created by the banking crisis.

However, the CML said that the temporary rise in the stamp duty threshold meant 51% of homebuyers had avoided stamp duty in September, compared with 22% in September last year.

UK housebuilder Taylor Wimpey said on Tuesday that it believed there would be no short-term recovery in the UK housing market.

The company welcomed last week's rate cut, and said it was hopeful that if it was quickly passed on to consumers it would help the market to return to stability more quickly.

"Increased mortgage availability and a return of customer confidence remain the key requirements for a sustained market recovery," Taylor Wimpey said.


Rics painted a more optimistic vision of the future. It said the worst may now be over, with 20% of its members now expecting sales to rise by the end of the year.

For sale signs
The number of home loans granted for purchases is at a new low

This compares with just 4% who had seen sales rising in September.

Rics said the growing optimism that sales would start to increase again was being driven by more sellers agreeing to drop their asking price.

"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," Mr Perry said.

Yet it also added that the prospect of rising house sales may also reflect expectations of an increase in the number of homes being repossessed.

Regional differences

The Rics figures showed that fewer than one property a week had been sold by each agent on average.

It found that London had seen the biggest fall in sales, with members reporting an average of just 6.4 sales over the three months.

Sales were strongest in the north-east of England, where each member had completed an average of 16 transactions.

The government's house price survey, which uses information from about 50 lenders, found prices had dropped by 5.1% year-on-year in England, by 0.8% in Scotland, by 5.2% in Wales and by 15.8% in Northern Ireland in September.

On Monday, Britain's biggest building society, the Nationwide, said that it expected house prices to continue to fall in 2009/10.

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