House sales to plunge, surveyors warn
House sales could slump by 40% this year as the credit crunch continues to damage sentiment, warned the Royal Institution of Chartered Surveyors (RICS) today.
That also has the potential to keep shoppers at home, said the surveyors' organisation in its latest forecast, with consumer spending likely to tumble 8%.
But its prediction of a 5% drop in house prices in 2008 is just half the 10% slide forecast last month by estate agent Savills which also reckons prices will drop another 15% next year.
"The second half of 2008 will prove a difficult period for the housing market," warned RICS' chief economist Simon Rubinsohn.
"Money looks set to remain tight and many will continue to find that access to the market is restricted by cautious lenders. Demand will remain pent up, with many watching the high-street banks for any sign of a softening in lending criteria."
He said the year-on-year decline in housebuying activity is already nudging 32%.
(Article continues below)Advertisement
Earlier this month, the chairman of the Building Societies Association (BSA) warned it will take at least two years for mortgage markets to recover from the credit crunch.
Looking further ahead, he predicted the return to a "more sensible" mortgage market.
Mortgage lenders have already slashed the number of home loans on offer, failed to pass on a series of interest rate cuts and increased the minimum deposit required to get the best deals.
Meanwhile, repossessions are set to rise to 43,000 this year, said RICS, although this is still way off the 77,000 seen in the early nineties.
"Homeowners are less vulnerable to repossessions than during the early 1990s' housing market crash," it said.
"Hundred per cent mortgages have not been as common during this cycle, indeed Rics estimates that the average loan-to-value ratio between 2005 and 2007 was in the region of 85% compared with 90% in the period between 1985 and 1989."
