Worst housing market in a decade

LONDON: Britain's housing market is facing its worst conditions in more than a decade, according to the Royal Institution of Chartered Surveyors (Rics). Surveyors are reporting falling prices, with February the seventh month in a row when sentiment has been negative.

The net balance of surveyors reporting falling rather than rising values climbed to 64.1% in February, up from 54.8% in January. This figure is only marginally higher than the historical nadir reached in June 1990. Such powerful anecdotal evidence reinforces data from the Halifax and Nationwide indices which have shown a pattern of gently declining prices.

Only Scotland is bucking the gloomy trend. Philip Shaw of Investec Securities said: "Housing demand has fallen off a cliff over the past year, with no signs of an imminent stabilisation in activity, let alone a recovery."

The decline in prices is driven by a lack of demand linked to the credit crunch, rather than a jump in supply of new housing.

Buyers are finding it tougher to raise mortgages. Banks and building societies have tightened up their lending criteria for fear of a rise in bad debts. They have also been "hoarding liquidity" to shore up balance sheets, and some have been badly affected by the collapse in demand for securitised mortgage-backed securities.

The Government has been hinting it may offer some kind of quality assurance ("Kitemarked securities") to unfreeze the market. Additionally, the UK's "sub-prime" lenders have disappeared. These factors have been reflected in a marked drop in mortgage approvals recently. Falling house prices will tend to exacerbate the credit crunch and could create a vicious circle.

The shortage of buyers has left a glut of unsold houses and flats. The stock of property on surveyors' books jumped by more than 8.5% in February, the fifth successive monthly increase of that magnitude. The ratio of sales compared to the stock of unsold property fell to 26.5%, the lowest since September 1996.

By The Independent