Buyer demand dropping at fastest rate since 2008
The demand from buyers for homes dropped for a second consecutive month, with another 33% of property professionals saying demand is falling compared with last month.
According to the Royal Institute of Chartered Surveyors, demand is now falling aster than any point since the 2008 recession.
RICS’s Residential market Survey for May also says that many are expecting to see the first short term drop in prices since 2012. Market confidence in some quarters is also falling.
Simon Rubinsohn, Chief Economist at RICS said: “This is the first time that a fall in prices has been predicted since 2012. London and East Anglia are expected to be worst hit with 43% (net balance) and 33% (net balance) of respondents saying that prices will fall over the next quarter.
“Sadly, for the many young people looking to enter the property market, it is unlikely that we are seeing the emergence of a more affordable market. Instead, it appears to me that what we are looking at is a short term drop caused by the uncertainty resulting from the forthcoming EU Referendum coupled by a slow-down following the rush to get into the market ahead of the tax change on the purchase of investment properties.
“Certainly, that’s the story we are hearing from our members. There is not at this point a sense that a fundamental shift is taking place in the market.”
However Simon doesn’t believe the current dip will have any long term effects.
Simon said: “The survey revealed that in the longer term, while house prices are thought likely to regain momentum, rents look set to outpace them, with UK rents predicted to increase by 4.7% year-on-year for the next five years, compared to house price increases of 4.1%.
“The number of agreed sales also fell for the second consecutive month with a net balance of 22% of respondents reporting a fall rather than a rise in activity.”
Andy Sommerville, Director of Search Acumen, said: “The government must be slightly startled that the possibility of a Brexit is engineering, for a very brief window, what it wanted to achieve along – greater affordability in housing. Fear, whether it’s rational or not, is driving the housing market, with prices in the capital already dipping downward, potentially due to overseas investors halting activity and regular citizens choosing to sit still until they’re on firmer ground.
“Regardless of the referendum, housing prospects remains bleak and a short term drop is unlikely to be beneficial to the average first time buyer, although some may be able to capitalise on the temporary advantage.
“The only solution to unaffordability remains those 240,000 houses that need building every year. Whether or not we leave the EU, we will still have to deliver more homes and this temporary uncertainty in the economy isn’t going to help get them build any quicker.”