The housing market is in "a state of torpor" according to the latest economic survey from The Royal Institution of Chartered Surveyors (RICS)...
Surveyors reported a drop in house prices during February, although the pace of decline eased to its slowest since last September. Prospective buyers remained cautious amid fears of a future rise in interest rates, a contrast from last year when it was believed that rates had already reached their peak, according to the report.
Newly agreed property sales rose slightly for the second month in a row, which was the first consecutive increase since last spring, but at the completion stage, sales slipped back, said the survey. New enquiries from would-be purchasers stayed static, although this was an improvement from the falls reported in the second half of 2004.
More Sellers Than BuyersWhereas buyer activity was less than buoyant, the number of sellers showed slight but sustained rises, leading to an increase in the number of unsold properties on surveyors' books. This is at its highest level since May 2003, and up 32 per cent over the last year.
RICS' report believes that with this extra choice of properties available, the climate for prices is likely to stay subdued. There could, however, be a spurt of buyer activity at the lower end of the market, where buyers have been assisted by a rise in the stamp duty threshold from £60,000 to £120,000.
However, because average UK house prices are still more than 50 per cent higher than the new threshold, this is hardly likely to be a key issue for would-be buyers - instead they will be keeping their focus on prospects for employment, incomes and interest rates.
Don't Rule out A Rate RiseOther findings from the RICS economic report were that consumer spending has "shifted to a lower gear of growth in response to rising interest rates". Business investment is holding up, they said, and a firmer global economy is giving some impetus to exports.
RICS believes that the outlook for 2005 will be dependent on how the industrial and service economy evolves throughout the year. They said that another interest rate rise later in the year cannot be ruled out, particularly if business investment and exports continue to strengthen.