Welsh house prices fall at fastest ever rate

Apr 16 2008 by Sarah Miloudi, Western Mail

HOUSE prices in Wales are falling at the fastest rate since records began, according to one of the market’s most influential monthly surveys.

For the 10th consecutive month, house prices in Wales have been in decline, slipping by more than 5% year on year across the nation and taking the average property price in Wales to £158,707.

Annual house price growth across the UK also continued its downward spiral, falling to 6.7%, its lowest level for 19 months, according to the Communities and Local Government ministry.

Confidence in the market is at an eight-month low, and yesterday’s survey by the Royal Institution of Chartered Surveyors (RICS) came as a new blow to home-owners as it revealed 75% more surveyors had witnessed a decline rather than an increase in the value of properties.

That statistic – widely seen as a barometer of the current state of the market – represents the lowest figure since the RICS survey began in 1978. And it easily exceeds the historic low of June 1990, at the start of the last housing crash, when 64.5% more chartered surveyors reported a fall than a rise in prices.

The research also disclosed new buyers were making fewer inquiries to estate agents and surveyors. It found those working in the industry had little confidence in the sales outlook for the market.

Cathy McLean, director of the RICS in Wales, said much of the decline in the Welsh housing market had been caused by the credit crunch placing financial constraints on mortgage lenders and borrowers.

She said the next six months could prove “crucial” for home- owners. And while buyers entering the market for the first time might be able to capitalise on the falling market, Ms McLean said those who already owned properties or were trying to sell their homes could face a nervous wait to see if the market improved – although she believed a market crash was “unlikely”.

“The slowdown in Welsh house prices is directly attributable to a lack of available finance which has hit demand,” she said.

“However, unless new supply increases dramatically a significant crash remains unlikely. The next six months will be a crucial period for homeowners but would-be buyers with larger deposits are likely to see this market as an opportunity to acquire property in areas to which they could not previously aspire to as recently as the end of 2007. Sentiment is at a very low ebb, and it is likely it will remain depressed while the economy continues to suffer.”

Across the UK, declining house prices are also being reported by RICS-registered surveyors, In England’s East Midlands, 89% reported a decline, while 86% said they had noted falls in East Anglia. Scotland was the only area in Britain where surveyors said house prices were on the increase.

Historically, spring is perceived to be the best time to sell. But those working in the industry say they are gearing up for a 2008 which bucks that trend. Nicholas Hill, of property auctioneer Newland Rennie Wilkins in Chepstow, Monmouthshire, said there was a “lack of enthusiasm” among buyers, while those selling their properties were slowly beginning to adjust their asking prices.

The ratio of completed sales compared to stock of unsold properties on sellers’ books – which economists view as a solid indicator of slack in the market – is known to have fallen in recent months, dropping from 26.3% to 24.8% – the lowest since 1996.

Few surveyors now expect property prices to rise and John R Davies, of JJ Morris surveyors and estate agents in Cardigan, said a “distinct” lack of confidence had becoming evident among buyers. “With Bank of England base rates at around the 5% mark, mortgages should still be affordable to the vast majority,” he said.

The RICS survey has been published monthly since 1978, and the 2008 report contained some of the most negative findings of the Institution’s 10-year history.

Yesterday, the Government also released its house price figures for February, giving home owners in Wales further cause for concern. In Wales, house prices fell almost 1% more than the UK average, causing Welsh Liberal Democrat Jenny Willott to ask the Government to take action. The MP for Cardiff Central said: “We are seeing a major and long-overdue correction in the housing market in Wales, and across the UK. The worry is that combined with high numbers of bankruptcies, record personal debt levels and high inflation, this correction may become a housing crash.

“The Government must take measures to ensure that we do not end up with mass household repossessions, which will only make a housing crash worse.”

Reasons to be cheerful, says estate agent - page 2