Sixth annual UK property industry survey shows massive collapse in confidence

A survey of UK property investors and professionals shows a massive collapse in confidence across the sector in the last two years.

Confidence in the residential property sector has crashed from 86% two years ago to just 7% now. And in the commercial sector it is down from 91% to 18%.

The economy and raising finance are the most important issues the industry is facing, according to the survey of investors, traders, developers, chartered surveyors, architects, lawyers and other service providers by professional and financial services group Smith & Williamson.

Its sixth annual survey also found that environmental issues are not a priority and tax remains a significant influence on business decisions.

'Market volatility means that it's a very challenging environment in which to undertake projects that can take several years to complete. In our experience some property businesses are sitting on the sidelines holding cash but are not yet willing to move back into the market,' said Nick Cartwright, chair of Smith & Williamson's Property Group.

'Graham Beale of Nationwide has said that house prices might end up falling by as much as 25% from their peak seen in autumn 2007 and Andy Hornby of HBOS has predicted that the credit crunch, which is restricting lending, would last well into 2010. There are no dissenting voices amongst our respondents,' he added.

It is clear that many believe that the UK government should do more to assist the industry. 'The Government has belatedly announced a few measures to assist the UK real estate sector, including raising the stamp duty land tax threshold and buying houses at knockdown prices from builders through the Homes and Communities Agency. The Government's proposals though have been widely criticised for being woefully inadequate,' he summed up.

There is not much sign of hope in the immediate short term. 'Interestingly, almost all of this year's respondents who intend to raise finance saw the banks as their prime source. At Smith & Williamson we have seen some bank lenders opening up for business again, but on a very tentative and different basis in terms of gearing, rates and valuations,' Cartwright said.

'Banks are understandably uneasy that valuations are now coming in with disclaimers due to market uncertainty, which is indicative of the sensitive nature of the market and the loss of appetite for risk. Until economic conditions and the bank's own balance sheets have improved, many banks cannot lend on property ventures, as frankly they need the cash themselves,' he added.