'Mixed' year ahead for the property market

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The Independent Online

Tentatively good news emerged from the economy yesterday, with indications that consumer confidence and the housing market showed some signs of stabilisation towards the end of last year.

The cautious optimism may not last, however: inflation is still expected to jump today, on its way to a 5 per cent- plus peak, and unemployment will be seen to increase when official data is published on Wednesday.

The Royal Institution of Chartered Surveyors' (RICS) December UK housing market survey predicts a "mixed" year ahead for real estate, with the suggestion that the spring may see a pick up in activity.

The number of surveyors reporting and predicting declines in prices still far exceeds those predicting a rise, but the negative balance is showing signs of moderation, from a net pessimistic reading of minus 49 in October to minus 44 in November and minus 39 last month. Some 29 per cent more surveyors predict prices would fall rather than rise over the next 12 weeks.

In the quarter to December, the average number of completed sales per surveyor stabilised at an average of 15.2, from 14.8. In East Anglia the market came to a virtual standstill at an average of just 10 transactions per surveyor over the three-month period.

As in 2009, a shortage of "quality" property coming on to the market may underpin prices, if not activity, in the short term, but the most disturbing trend identified in the survey is the continuing drop-off in new buyer enquiries, which the RICs attributes to the shortage of mortgage finance, as well as more general concerns about the economy. New buyer inquiries – the main support for a rising market – fell for the seventh consecutive month.

The RICS publication said: "Surveyors continue to report that lending constraints, particularly to first-time buyers, remain the biggest barrier to any strong improvement in the market". The exceptionally cold weather also hit activity: estate agents reported the number of agreed sales in December fell.

Perhaps surprisingly in the circumstances – rising unemployment, public spending cuts, tax hikes and job losses – consumer confidence picked up slightly in December after three months of falls had forced it to a near record low in November.

The Nationwide Building Society's review of household sentiment shows it remains "substantially below its long-run average", however. In line with the RICS figures, consumers expect the value of their home to decrease by 0.9 per cent over the next six months.

Robert Gardner, Nationwide's chief economist, said: "Over the course of the next few months it should become clearer as to what impact the increased rate of VAT has had on attitudes. If consumers decide to tighten their belts, we could begin to see a noticeable shift towards people saving more."