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UK property market facing mini ice age as two major reports indicate poor outlook

Demand failed to pick up and the supply of new property fell back last month, the latest RICS UK Housing Market survey from the Royal Institute of Chartered Surveyors shows.

While a report from top accountants Pricewaterhouse Coopers says that the housing market is entering a mini ice age, with anybody who bought between 2006 and 2008 among the biggest losers.

It warns that the UK’s 18million home owners that prices may not recover to their peak levels for more than a decade and there is a ‘near 50% chance’ that prices will still be underwater in 2020.

The RICS report shows that demand for property showed little change in June, with new buyer enquiries recording a net balance of 0%. Demand has been broadly flat for the last six months. Chartered surveyors report that because the market remains difficult to access, the only buyers who can really be considered serious are those who have already sold their property, or have a mortgage agreement in place.

New instructions, which had been stronger in April and May, fell back to a net balance of +1% from +14% in June, indicating that sellers are now holding off from putting their properties on the market. This was in part attributed to uncertainty over the economy and a ‘wait and see’ attitude from potential vendors.

As a result overall activity levels barely changed in June. Newly agreed sales edged up marginally, with 6% more surveyors reporting sales rose rather than fell, compared with 5% in May.
Meanwhile, the average number of completed sales per surveyor in the three months to June failed to move, staying at just 14.8. Alongside this, the average number of stocks on surveyors’ books fell fractionally to 69.5 from 71.7.  Surveyors note that properties are still selling, but only if priced realistically.

House prices at a national level continued to slip during June, with 27% more surveyors reporting price falls rather than rises. Looking ahead, expectations for future house prices showed a broadly similar pattern, with 27% expecting prices to fall rather than rise over the next three months.

‘Buyer interest in purchasing property remains relatively low across much of the UK and the volume of new stock coming to the market has slackened. With continued uncertainty over the jobs market and the economy, this subdued picture is set to continue,’ said RICS housing spokesperson, Alan Collett.

London, however, remains a market apart with both sales and prices showing a greater degree of resilience,’ he added.

John Hawksworth, chief economist at PWC, blames the housing crisis on a long list of woes, from the battle to get a mortgage to the poor pay rises or pay freezes being given to workers.

In a warning to homeowners worried about the value of their house, he said it is ‘likely to be a long and bumpy road to full recovery’.

The PWC report points out that the worst hit will be people who bought at or close to the top of the market, that is between 2006 and 2008. Many will be in negative equity because they took out a large mortgage to buy the property, possibly 125% of the property's value, but it is now worth less than the size of their loan.

Other losers will be people who want to move to London or the rest of the South East from elsewhere in Britain. This is because prices continue to rise in London, unlike any other region, which means the capital is becoming increasingly unaffordable for those who live elsewhere but want to move.