UK Housing Market - Worst in 30 Years?

The Independent and The Royal Institute of Chartered Surveyors certainly think so!

Thanks to falling property prices and continued restrictions imposed by mortgage lenders on home loan finance, confidence in Britain's housing market is at its lowest level since 1978.

The Royal Institute of Chartered Surveyors (Rics) says that 95 per cent of its  surveyors reported a fall in house prices in April.

In areas like East Anglia, the North and North-west of England, not a single surveyor reported house price increases. Even in Scotland, where the housing market has been more robust until recently, more and more surveyors are now reporting house price falls.

Britain's property market may deteriorate much further if the widely predicted economic problems were to cause an increase in the number of homeowners to face repossessions. People facing financial hardships will try to offload their properties at much reduced prices, causing much more significant price falls overall.

In fact this trend may already have begun. In London surveyors are reporting a big jump in the number of properties coming on their books indicating that these may well be forced sales – either repossessions or sales from those attempting to avoid the repossession process, according to RICS.

However some estate agents reckon that the current house price falls are modest and the picture is still patchy, with some areas of the country finding it tougher than others. Areas with low unemployment and other weak economic indicators may be more prone to sharp falls than others.

However RICS does not think so. In its recent report, the number of sales completed by surveyors over the three months to the end of April was the lowest since 1997. The number of unsold properties on their books is at its highest level since 1998, and the number of sales as a proportion of unsold properties is now at a 12-year low.

These findings are also in line with the most recent warnings by Halifax Bank and Nationwide Building Society, the country's two biggest mortgage lenders.

Economists are warning that the house prices are likely to fall further this year and the next as in coming months. Economic uncertainty has already made people to spend less on discretionary items as the cost of mortgages rise, as well as the fuel and food prices have risen in recent months. This will almost certainly have wider economic implications.

Are experts correct that we are heading for a crash in house prices? Only time will tell. However there is no denying the fact that that the house prices have defied gravity in the last 10 years.

May be it is time for a correction!

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Extract of this article has been taken from The Independent (13 May 2008)
Research report link