The housing market is deteriorating. In the latest survey from the Royal Institution of Chartered Surveyors (RICS), sales fell to their lowest level in two years in August, and there was a slight increase in the pace of house-price falls. The latest Nationwide and Halifax releases both revealed the first monthly slide since April; in Nationwide’s case, the fall was the steepest since October last year.
Lending data from the Financial Services Authority showed that new mortgage commitments in the second quarter were 3% down year-on-year. Mortgage approvals for new house purchase are still less than half pre-credit-crunch levels.
What the commentators said
Further house-price falls are on the cards, said Capital Economics. When credit is this tight, “the influence on housing market activity and prices…is downwards”. Then there’s the worsening economic outlook, especially in the labour market. “The risk is that [this] will begin to have a more material impact on sentiment and discourage potential house purchasers,” said Alan Collett of RICS.
Unemployment posted its biggest rise since 2009 in the three months to July. Inflation-adjusted pay is still falling at almost 2% a year. The market also remains wildly overvalued. Nationwide figures show a house price/earnings ratio of 4.4; the historical average is 3.4. That implies a 23% house-price decline just to get back to the average. The post-2007 house-price slide isn’t over yet.