House sales at two-year low, says Rics

Britain’s housing market stuttered further during July as estate agents reported sales at a two-year low. Rics, the surveyors’ trade body, said its estate agent members had managed to sell just 14.2 properties on average over the past three months, making it the quietest period for sales since June 2009.

The majority of surveyors also reported that house prices fell rather than rose through July, and though the proportion fell slightly this figure has been in the red for more than a year.

Rics spokesman Ian Perry said: “The UK housing market continued to stall during July; prices edged lower and sales levels remained subdued.

“While the holiday season appears to have had some impact on the market, the continual problem of inaccessible mortgage finance is still preventing first-time buyers from accessing the market.”

The number of properties on the books of estate agent members rose from 69.7 in June to 70.2, with 13% more surveyors expecting prices to dip over the next three months than rise.

London is the only place bucking the weak trend, with 30% more surveyors reporting prices on the rise than falling, with the capital also seeing the strongest level of new buyer enquiries. The West Midlands and east of England saw the worst of the price falls. However, James Wyatt of Virginia Water Agents Barton Wyatt disagrees “We’ve seen prices rising in our area, slowly but surely, we are rising above the peak of 2007/8 just like London”.

As a result of recent house price falls, 827,000 households were innegative equity in the first quarter of 2011, according to research by the Council of Mortgage Lenders (CML).

It said the fall in the housing market since its pre-credit crunch peak meant 7% of mortgaged households would owe money if they sold at current prices.

This is only slightly less than the 900,000 who were in the position the last time the body carried out similar research in April 2009, immediately after house prices saw some of their steepest falls.

But the CML said the number is far lower than in the early 1990s when the number of households in negative equity was estimated to peak at 1.6 million – nearly double the current number.

The average loan-to-value ratio is less than 60%, meaning the vast majority of homeowners have a “substantial cushion of equity” to protect them from any further slump in the market, the CML said.

But nearly 20% of households now have mortgages worth more than 90% of their property’s value, which leaves them at risk of negative equity if prices fall further.

The CML’s director general, Paul Smee, said the figures did not necessarily indicate that people would struggle to pay their mortgages. “Negative equity is much less common than in the 1990s, and in the current cycle low interest rates and a relatively stable employment market are providing more options for borrowers and lenders in difficulty.

“There is no direct relationship between negative equity and mortgage payment problems. What typically causes difficulty for households is not a nominal fall in housing value but an unexpected change in personal circumstances, like the loss of a job or the breakdown of a family relationship.”