As RICS reports a downturn in house price growth for the first time in almost two years, could this pinpoint the beginning of a trend in falling prices?
Another day, another house price index. Today it's the turn of the Royal Institute of Chartered Surveyors (RICS) with the attention-grabbing news that house prices have fallen for the first time since October 2005.
The RICS UK housing market survey for August reveals 1.8% more Chartered Surveyors reporting a fall rather than a rise in house prices, down from +10.8% reporting an upturn in July. The trend of falling house prices was most evident in the West Midlands, the North West and East Anglia. Interestingly, the capital seems to be untouched with surveyors so far reporting the strongest house price growth in the London market.
Equally new buyer enquiries fell for the ninth month running and at the fastest pace since August 2004. 37% more Chartered Surveyors reported a fall rather than a rise in new buyer enquiries, compared with just 27% in July. The decline in enquiries was felt in virtually all regions across the country.
New instructions to sell property also dropped for the third consecutive month. RICS reports that vendors don't appear to be under pressure to sell with the supply of property yet to be sold on surveyor's books falling by a tenth on the position a year ago.
In a separate survey this week, RICS told us demand from tenants for residential lettings is rising fast with rental yields predicted to reach record levels. This would appear to bear the latest data out. Conversely, demand from first time buyers certainly appears to be slowing with many refusing to take the plunge. Fears of rising mortgage repayments show little sign of abating until a clearer picture emerges of the effects the interest rate cycle will have on affordability.
A further rise in interest rates to 6% is still possible, so continued caution from potential buyers over the coming months wouldn't be particularly surprising. This has led surveyors themselves to lose confidence in the prospects for house price growth going forward.
But has RICS uncovered the beginning of a new trend in falling house prices? Although the survey is the longest running of its kind, here at The Fool we have, at times, been dubious about the value of such house price data. Indices would be more useful to us if the various sources managed to reach a consensus. But unfortunately, this rarely seems to be the case making it difficult for us to draw any real conclusions. But it will be interesting to see how house price growth really pans out over the rest of the year.
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