UK housing market not as weak as expected in August -UPDATE

Date: Tuesday 11 Sep 2012

House prices in Britain continued to decline in August, albeit more slowly than anticipated, according to a survey conducted by the Royal Institution of Chartered Surveyors (RICS).

The RICS house prices balance for August was -19, versus market consensus expectations for a reading of -23. The balance is calculated by subtracting the percentage of respondents reporting a fall in house prices from the percentage of those witnessing a rise.

The July reading has been revised to -23 from a provisional level of -24.

"These series together point to a broadly flat trend in prices at a national level. However, this inevitably masks significant regional variations," RICS said.

Inevitably, London remains a special case, and was the only part of the country where the RICS net price balance was positive. Furthermore, this trend is expected to continue, with London the only region to record a positive price expectations balance.

Although RICS acknowledged it was a bit early to draw too many conclusions from the Bank of England's Funding for Lending Scheme (FLS), there are signs that the FLS is succeeding in its aim of getting banks to loosen up a little on mortgage availability.

"The forward-looking indicators for sales - over both a three- and 12-month period - suggest respondents to the survey are indeed hopeful that a combination of a more stable economy and an improvement in the funding climate will help support activity," the RICS report said.

In the June to August period, chartered surveyors sold 7.5% of the homes on their books per month on average, in line with the trend for most of 2012.

Nevertheless, in August the balance of respondents reporting a rise in demand versus those reporting a decline widened to -9 from -4 in July.

Ian Perry, a RICS spokesman, said the Olympics did not have much impact on the proportion of sales going through.

"Understandably, the amount of people out looking at property fell away slightly but, generally speaking, demand held up fairly well," Perry said.

Data suggests a further improvement in prices

Commenting on the data, this is what economists at Barclays Research were telling clients this morning: “In recent years, trends in transactions appear to have led price developments – suggesting a further improvement in prices as activity picks up.

“However, we would caution against over-interpreting one month’s data as this survey can be volatile. Furthermore, the sales-to-stock ratio reported only a marginal increase to 22.5 (from 22.2), well below the levels seen prior to the financial crisis and indicating broadly flat activity in the housing market.”

JH

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