Property Sales may fall further
20 May 2008
The Royal Institution of Chartered Surveyors (RICS) has warned that property sales may fall by 40% this year because of the credit crunch. In its updated forecast for the housing market in 2008, RICS also predicted that prices would fall by 5%.
RICS chief economist Simon Rubinsohn explained: “Any large fall in sales would be worrying and could reduce consumer spending by 8%. Such a drop in sales would represent the biggest shrinkage in the UK housing market since modern records began.
'Money looks set to remain tight and many will continue to find that access to the market is restricted by cautious lenders. This could have important ramifications for the wider economy, not only hitting the property industry directly, but also impacting on a broad range of related sectors whether that is the high street purveyors of home furnishings and white goods or financial intermediaries involved in providing mortgage advice.'
The Department of Communities and Local Government (DCLG) recently revealed that the biggest annual fall in property sales so far was in 1989 when, in England and Wales, they fell by 26%. According to the RICS, sales are already down by 32% on a year ago.
Mr Rubinsohn was more positive about the threat of repossessions: “Homeowners are under less threat of negative equity and repossession than was the case in the recession of the early 1990s. This is due to recent borrowers having to put down larger deposits and paying off their loans with conventional repayment mortgages.
'100% mortgages have not been as common, [we] estimate that the average loan-to-value ratio between 2005 and 2007 was in the region of 85% compared with 90% in the period between 1985 and 1989.'
'In the three years to 2007, 71% of first-time buyers' mortgages were made on a capital and interest repayment basis compared to only 17% in the three years to 1989”.
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