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Year of Two Halves - RICS UK Housing Market Forecast for 2008
RICS expects UK house prices to be broadly
unchanged in 2008 but acknowledges that the market could experience some
near term weakness.
Crucially, RICS does not believe that any drop in house price will be
extended in duration. The Bank of England has already signalled its determination
to counter any threat to the economy from the liquidity squeeze by cutting
interest rates and RICS expects base rates to be lowered to 5 percent
in the first half of 2008. It is also significant that new instructions
to sell have continued to slip back, a result consistent with a firm employment
picture. As in 2005, unless there is a sharp rise in new instructions
to accompany the drop in new buyer enquiries, RICS believes it unlikely
there will be a great fall in house prices.
Repossessions will rise from 30,000 to 45,000 - amounting to 123 repossessions
per day - as mortgage resets begin to bite. This is still well below the
high water mark of the early 1990's when repossessions rose to close to
80,000. If labour market conditions remain generally firm, an influx of
supply from homeowners forced to sell by increases in their mortgage repayments
seems unlikely.
RICS believes that there is strong pent up demand from first-time buyers
who have been awaiting an opportunity to access the housing market. Should
prices soften to any extent, RICS expects that many first time buyers
will attempt to capitalise where they have been previously squeezed. In
a climate with strong employment conditions, this should provide a boost
to a flagging market.
Buy-to-let investment could slow into 2008 as the range of mortgage products
diminishes in light of the credit crunch. But RICS research shows that
there is little evidence of widespread sales of investment properties
taking place.
RICS chief economist, Simon Rubinsohn said:
‘2008 will prove a difficult year for the housing market, but with
falls likely in the base rate, the housing market should be provided with
a stable platform. The effect of the credit crunch will dissipate slowly
meaning that those seeking to obtain finance in the first half of 2008
may struggle.
‘However, the employment picture should remain firm throughout the
year, helping to prevent significant numbers of repossessions and the
subsequent influx of supply into the market. This should ensure that house
price growth remains broadly flat over the course of the year.’
