Housing market sentiment in UK recovered strongly

05-11-2009 17:56

In April the weak US housing market recovered, reaching a record level versus January 2008. Housing sales increased for the second month while new buyer inquiries rose at the fastest tempo in nearly 10 years, proved by Tuesday’s data. Despite that the residential property prices in the UK fell by more than 15% and although sales dropped over 40% in the last year, the markets started to improve, which is proved by the Royal Institution of Chartered Surveyors (RICS) latest report.

In April the RICS survey's headline price balance rose to -59.9 while March showed a revised -72.1; a record level versus January 2008. This outcome exceeded the market consensus estimation of -69.3 which was released by economists last week in a Dow Jones Newswires study. However, it remains extremely negative despite the major recover versus April 2008, which showed a record low of -94.9.

According to the study, during the last three months the average quantity of completed sales per surveyor went up for the second straight month to 10.6 in April versus 9.7 in March, while February showed a record low of 9.6. However, the RICS proved that property sales dropped 41% on a yearly basis.

For the sixth straight month new buyer inquiries went up in April at the fastest tempo since August 1999. On the other hand modified instructions concerning selling property dropped considerably. The Easter holidays and the good weather in April could have caused buyer inquiries to increase.

The RICS study adds to various economic reports which proved a recovery in the past months. These results indicate that the record low interest rates of the BoE and the government's multibillion pound fiscal stimulus are easing the effects of the downturn in some quarters.

It appears that some confidence data and other house price actions have seen a bottom. The recent British retail consortium report proved that in April retail sales in the UK showed the highest growth in three years. Confidence in the sales estimation went up for the fourth straight month at the fastest tempo since 2005, while newly agreed sales increased at the strongest tempo since January 2004. Despite the improvement in the price outlook to a record level versus October 2007, it remains gloomy.

The RICS stated that the stressed financing conditions would result in a gradual recovery in the housing market.