The latest housing survey from the Royal Institution of Chartered Surveyors (RICS) says that the unrealistic prices asked by some house sellers may be holding the housing market down.
The last quarter of 2011 saw an average number of house sales per surveyor of 15.2, which although a bit down on November, is just about the best level since 2010 says the report.
But confidence in the first quarter of 2012 is subdued RICS says: “However, sales expectations for the coming three months dipped to a net balance of 0% (from +4%). Surveyors report that unrealistic price expectations on the part of some vendors may be hindering transaction levels.”
The number of properties coming onto the market rose a little towards the ends of the year with net balance of 12% of the survey respondents saying that there were more new instructions. London saw the highest increase in new instruction with a net balance of 38%.
Potential buyers though are not quite so plentiful. Only a net 2% of those surveyed saw an increase in buyer activity, down on November’s 7%. But it was of course the festive season.
Although a net balance of survey respondents of 16% saw a fall in house prices it was relatively slow when compared to the recent past.
RICS also unsurprisingly says that the survey indicates that a lack of mortgages is affecting the market and says that it is the cash rich that are best placed to buy at the moment.
Overall, a net balance of 21% of survey respondents expect prices to continue to fall during the next three months.
RICS housing spokesperson Ian Perry said:
While it’s encouraging that sales activity held up relatively well towards the end of the year, continuing problems with the economy and the ongoing instability in the eurozone seem to be weighing heavily on the UK housing market and expectations for the coming months are fairly subdued.
The increasing number of prospective sellers who placed their homes on the market in December is a positive development as a lack of stock has been a big issue in some parts of the country, but with sales expectations remaining flat, it is important that vendors are realistic in their pricing if they wish the sale to go through in good time.
It is worth looking at house asking prices against that experienced by the lenders when the sale has actually gone through and the Land Registry figures.
In November the Land Registry (that is arguably the most accurate measure as it records all transactions) put the average house price at Â£160,780 and in Dec the average of the Nationwide and Halifax house price indexes put the average house price at Â£161,943 a not too dissimilar figure. But the Rightmove average asking price for December was a hefty Â£225,766.
This put the average asking price at nearly 1.4 times, or 40% higher, than the actual price achieved. Very optimistic!
You can see from the graph below for this ‘Optimism Index’ from 2007 how the trend in asking far more than the realistic price has tended to trend upwards.
So, maybe RICS has a point when it says “Surveyors report that unrealistic price expectations on the part of some vendors may be hindering transaction levels.”