There was further bad news for the housing market at the start of the year as prices continued to tumble and demand from buyers remained weak.
Almost a third more surveyors repor-ted a fall rather than a rise in prices in the January housing market survey published by the Royal Institution of Chartered Surveyors (Rics) today.
A spokesman said the "key indicators" had remained negative, following weakness in December, adding: "Uncertainty over the prospects for employment, alongside the shortage of mortgage finance particularly for first-time buyers continues to weigh heavily on transactions levels." December activity levels had been hit by the severe weather conditions during the month, although the market had been soft throughout the year.
Agreed sales dropped in January to the lowest level since June 2009 as the average number per surveyor slipped in the three months to January from 15.2 to 14.6.
The Rics said the ongoing sluggishness in the market showed potential buyers remained cautious over the economic outlook and the possibility of rising mortgage rates later in the year.
Howard Archer, an economist at IHS Global Insight, said the knock-on effect would hit consumer spending. "Weak housing market activity limits the demand for furniture, furnishings and carpets, while falling or even muted house price rises limit the ability for housing equity withdrawal. The housing market is likely to be pressurised over the coming months by high and likely-to-rise unemployment, negative real income growth, the increasing fiscal squeeze, very low consumer confidence and ongoing difficulties in getting a mortgage, particularly for first-time buyers."
There could be more pain for the housing market if the Bank of England raises inflation rates in the next few months, IHS added.
Supply levels have improved from December, but there were still fewer properties coming onto the market. The Rics survey found that 3 per cent more surveyors were reporting instructions had fallen rather than risen.
"If there is a sustained fall in the number of houses coming on to the market, it could provide significant support for house prices," Mr Archer said.
Although negative, the institution pointed out the balance had improved for its third month in a row and stood at its highest level since July. Surveyors also remain cautiously optimistic, it said, with the balance of sales expectations increasing from eight to 10. Price expectations remain negative but less so than the previous month.
Bellway on the up
The housebuilder Bellway painted a more bullish picture to the start of the year than the Rics, saying it had been "encouraged" by the number of visitors and reservations since the beginning of January. This came after the number of site visitors had dropped during the cold weather the previous month. In an update yesterday, Bellway said average sales had risen during the six months to the end of January. The group sold 2,332 homes over the period, 85 more than a year earlier, for an average of £168,000, an 8 per cent bump year on year. The rise has been helped by Bellway's move away from flats to two-storey houses.Reuse content