The latest RICS UK Housing Market survey for June 2011 shows the property market facing a stalemate.
Demand for property in the UK has failed to pick up, whilst the supply of new property fell back.
New buyer enquiries recorded a net balance of 0% in June, compared with -1% in May 2011. Demand has been broadly flat for the past six months.
Chartered surveyors are reporting that the property market is difficult to access, with the only ‘serious’ buyers those who have already sold their own properties, or have a mortgage agreement firmly in place.
New instructions for the sale of property fell back to +1% in June, from +14% in the previous month. This suggests that people are holding back from putting their property on the market.
The RICS survey for June also suggested that house prices (at a national level) continued to fall in June.
27% more surveyors reported price falls rather than rises and expectations for future house prices showed a broadly similar pattern.
This survey comes on the same day that PwC predicted that real house prices, after accounting for price inflation, will remain 12% below their 2007 peak until 2015.
Within the PwC forecast, chief economist John Hawksworth said he expects average UK house prices to drift down further over the next year and then enjoy a modest recovery over the next few years.
What does all of this mean for the investor and more generally for the UK economy?
House prices are important for consumer confidence. When prices are going up, people feel financially robust and are more likely to spend. Falling or stagnant house prices tend to have the opposite effect on consumer confidence.
Whilst interest rates remain at their all-time low right now, they will have to go up again at some point in the future. Higher interest rates combined with a falling or flat housing market is unlikely to spell good news for the UK economy.
Photo credit: Flickr/bixentro
