House prices fall sharply in West Midlands

HOUSE prices in the West Midlands fell sharply last month, according to the latest data from the Royal Institution of Chartered Surveyors.

The region was way above the national average with 34% of surveyors reporting price falls last month rather than rises – nationally, 8% of  surveyors reported prices falling. The situation has sparked fears of a double-dip recession in the crucial housing market.

The figures are the lowest for more than a year and the principal reason is thought to be an over-supply of properties created as people decide to take advantage of the upturn in the economy and the abolition of Housing Improvement Packs (HIPs).

However, buyers are still finding it hard to get the mortgages they need as the tight controls on lending by the banks continues, thus ensuring supply outstrips demand. Elsewhere, concerns about the overall stability of the economy have deterred other buyers from committing to long-term deals.

Richard Franklin, Edward Gallimore and RICS West Midlands spokesperson, said: “The fall in the RICS house price measure is broadly consistent with most other recent data that has been released. This is a reflection of both the increase in supply following the scrapping of HIPS and the more cautious stance from buyers.

“With a gentle softening of the market in the second part of the year the emphasis will be on vendor’s to price realistically to achieve a sale. When the market is falling, however slightly, the longer a property remains unsold the more overpriced it looks and the less likely a sale. The market is currently a place for pragmatists, for those with a disposition for rose-tinted views current trends suggest sitting it out.”

Regionally, the only areas which continued to see material price rises in the past month were London and the North West.

RICS said that nationally, demand for property, measured by the net balance of new buyer enquiries, fell for the second month in a row, from -6 to -10.  In the West Midlands the net balance reduced even further, with 30% of surveyors now reporting a fall from an already negative 5% who reported a fall during the previous month.

The number of new properties coming to the market, increased. Nationally 33% more surveyors reported a rise rather than fall in properties to their books, up from 28% in June.  This trend is also reflected in West Midlands, with 51% more surveyors reporting a rise rather than a fall in new instructions – up from an already positive 30% last month.

The national figure is the highest reading since May 2007, the month before the initial planned introduction of HIPS. RICS said that since the abolition of HIPS in May this year, it appeared homeowners were now a little more willing to test the property market.

In keeping with the trend of increased supply to the market, the average number of properties on surveyors’ books also rose by 4.1% from June, taking the national average to 69.1. In the West Midlands however, the figure reduced by ten percentage points to 83.

Meanwhile, the average number of sales per surveyor nationally stayed flat, at 16.6 (down 0.1%) and there was also no change in the West Midlands regional measure which remained at 21.

Sales to stock ratio – a useful indicator of market slack – fell to 24% nationally, the lowest level since June 2009, while in the West Midlands, it increased slightly to 25%, up from 23% in June. Newly agreed sales reduced significantly in the region, with 48% more surveyors reporting a fall rather than a rise in the number of transactions, down from a positive 37% in June.

Looking forward, expectations for house price increases across the country have also turned negative, with 28% more surveyors expecting prices to fall over the coming months, up from 6% in June.  The West Midlands statistics show a similar trend, with 52% of surveyors in the region expecting a fall.