UK Property Market Still Hindered by Lack of Supply and Mortgages

The Royal Institute for chartered Surveyors has announced a massive increase in buyer interest in the UK property market for February. The associated press release said:

"20 percent more Chartered Surveyors reported a rise than a fall in new buyer enquiries up from 15 percent in January. Interest is strong in nearly every region with London and the south of England leading the way. In fact interest in London reached levels not seen since October 2006. 44 percent more Chartered Surveyors reported a rise than a fall in new buyer enquiries in London up from 25 percent in January. The rise in interest reflects both the drop in asking prices and continued interest rate cuts. As house prices fall, those with finance are looking to pick-up up bargains."

However, the press release said that this pent up demand is still not translating into sales, with the average number of transactions per agency at its lowest level since the RICS survey began in 1979. London is apparently seeing the least transactions, despite its enjoying the highest levels of buyer activity.

This is still down to low levels of supply, with the number of instructions to sell received by RICS members still "in negative territory".

However the survey also found that more RICS members are now recording price falls, indicating increasing realisation among sellers that price drops are necessary. This is necessary for the market to bottom out, according to our own Liam Bailey, who was quoted in The Move Channel yesterday as saying:

"The UK property market will not hit a solid bottom until the gap between what buyers are willing to pay (how cheap they can get the property they want for) marries with what sellers are willing to drop their price to, with the latter being forced to move most as the months bring more realisation that price drops are necessary to sell their property."

RICS spokesperson Jeremy Leaf put the lack of transactions down to the lack of available mortgage finance, he said:

"Potential buyers continue to come through estate agency doors but without mortgage finance transaction levels are likely to remain close to all time lows. Worryingly, the lengthy process of obtaining mortgage finance, even for those with large deposits, is contributing towards the blockage in the market place."

Calling on the government for more action Leaf added:

"The Government must provide guarantees for the new issuance of residential mortgage backed securities to help first time buyers in particular and give the market much needed impetus."