‘Sales of homes will fall by 40%’
May 19 2008 by Graeme King, The Journal
HOUSE prices across the country are predicted to fall by around 5% this year, with the number of sales falling by a massive 40% – unless the credit crunch eases.
The latest Housing Forecast from the Royal Institution of Chartered Surveyors (RICS) makes for gloomy reading – though many commentators are not predicting as bad a situation in the North East as elsewhere in the country.
Despite RICS saying in December that it expected the housing market to “gain some traction” during the latter part of 2008, the body now says the ongoing re-pricing of risk by lenders makes that improbable. RICS believes that prices will continue to edge lower during the remainder of 2008 – though does say this will be relatively modest.
The body’s experts say homeowners are less vulnerable to repossessions than during the early 1990s housing market crash, with little evidence that ‘distress sales,’ which characterised the 1990s, are picking up. And RICS estimates that the average loan-to-value ratio between 2005 and 2007 was in the region of 85% compared with 90% in the period between 1985 and 1989.
While the price fall in the forecast is modest, the predicted collapse in transactions is far more worrying. RICS forecasts that transactions could drop 40%. The RICS survey says a lack of liquidity has started to hit property sales – down 31.7% on levels 12 months ago.
Simon Rubisohn, chief economist of RICS, said: “The second half of 2008 will prove a difficult period for the housing market. Money looks set to remain tight and many will continue to find that access to the market is restricted by cautious lenders.
“Demand will remain pent up with many watching for any sign of a softening in lending criteria. It is worrying that property transactions could fall by as much as 40% this year. This could have ramifications for the wider economy, impacting on related sectors like home furnishings and white goods or financial intermediaries involved in mortgage advice.”
