This week brought further evidence that the rebound in house prices is going into reverse. July’s survey by the Royal Institution of Chartered Surveyors (RICS) revealed that more surveyors reported falling than rising prices in July. The balance of -8.4% was the first negative reading in a year. This chimes with price falls registered by the Halifax in three of the last four months and four successive monthly falls in the LSL Academetrics Index. The RICS survey also found that instructions to sell have risen to a three-year high. Meanwhile, the new buyer inquiries balance was negative for the second successive month.
What the commentators said
Prices have bounced in recent months amid a shortage of sellers. That drove the number of property transactions to a 30-year low. But things are changing, as The Times points out. Sellers – many under financial strain – are scrambling to cash in on recent price rises. The abolition of home kit HIPS has also underpinned the sales surge. And now it’s buyers who are thin on the ground, said Ian Campbell on Breakingviews. Depressed earnings and dwindling confidence, thanks to looming cuts, are key obstacles, as is tight credit. Indeed, according to Nationwide, first-time buyers are finding it harder to buy than at any time in the last 25 years, thanks to tight credit and high prices.
That’s another problem, as Capital Economics points out. House prices are still 20%-25% too high compared to incomes and rents. Add all this up and further falls are on the cards. Miles Shipside of Rightmove is “anticipating prices will drop back for the rest of the year”. Capital Economics reckons they could lose 30% in real terms over the next three years.