RICS reports improved demand for UK property

13th December 2011

If we look at the details we see that whilst a balance of 17% of surveyors now expect house price falls against the 24% which was recorded in October. In fact a further fall to 25% was expected by the economists surveyed by Bloomberg so not only were they wrong yet again but more seriously they even got the direction wrong! So this report has arrived as something of a surprise to those ten economists at least. There was also a little support from the number of buyers enquiries which a net balance of  7% of surveyors said has risen and from the number of actual sales which a net balance of 14% said had risen.

Is this a possible turn in the housing market?

This seems very unlikely to me and this is more like a bit of weak winter sun for the housing market. The RICS survey quoted from above has a net balance of 21% of surveyors who expect price falls over the next three months. Even the Halifax Bank of Scotland which shares with the RICS a vested interest in the housing market doing well can only bring itself to predict a flat housing market for the UK in 2012 as it gave a range of -2% to +2% yesterday.

One other factor that continues is the central London proprty bubble as in the RICS survey only one area show actual house price rises over the past 3 months and surprise,surprise it was London!

If we now consider why there might have been an improvement for the rate of decline in the housing market then this report from the Council of Mortgage Lenders may well give a clue.

"The data shows that, although first-time buyers' deposit requirements have remained stable in recent months at an average of 20%, their monthly interest payments have continued to fall and now typically consume 12.3% of income, the lowest level since January 2004. Affordability for movers also improved, with this group paying an average of 9.2% of income on mortgage interest, the lowest level since monthly records began in 2002."

So there is some support for the housing market from affordability but we need a caveat here which is affordability for those who qualify for a mortgage. We are in an era where we need to consider quantity as well as quality. If we look at the quantity of mortgages we see that the numbers remain very weak and in October

"In October, 44,500 loans for house purchase (worth £6.5 billion) were advanced, down from 48,200 (worth £7.1 billion) in the preceding month and from 46,900 (worth £6.8 billion) in October 2010."

And there was also a fall in remortgaging which is we consider the improved affordability above seems to indicate that there are quantity constraint here too.

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