The latest survey from the Royal Institution of Chartered Surveyors (RICS) indicates that house prices are falling at the same rate that they did in the housing market crash of the early 1990s. The feeling is that only further reductions in the base interest rate will avoid a property meltdown.
Estate agents, who help to complete the survey, have reported falling prices in their highest numbers since 1992. One was quoted as saying December was “maybe the worst [month] we have had in 17 years.” More than 60% of the 500 completing the survey said that house prices had fallen over the last three months.
Nobody will want a return to the dark days of the early 1990s when many people fell into the negative equity trap.
RICS spokesman Ian Perry said: “The Bank of England may have to cut rates further if the market is to remain stable.” Last week the Bank refused to cut rates again after it had done so, by a quarter of a point, in December.
Seasonally adjusted figures - regarded as very important by RICS - suggest that the difference between those reporting a fall and rise was 49.1% in December - the highest for over fifteen years.
Most regions have been hit and the West Midlands is in the midst of its fastest fall in history.
The housing market was described by estate agents as ‘depressing’, ‘fragile’, ‘extremely quiet’. One said the crisis could continue for five years, adding that more reductions in interest rates were needed to avoid a 90s style property recession. Another agent said that the combination of Home Information Packs (HIPs), Christmas, interest rates and the credit crunch mean ‘hard times’. HIPs have been roundly blamed by many in the industry for housing market problems. All sellers must now have a pack, and agents believe this has put many people off putting their house on the market to ‘test the water’. Many in that position before HIPs ended up selling their house after receiving a persuasive offer.
Capital Economics forecasts that house prices will fall by 5% in 2008 and 8% in 2009
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