Housing market ‘stuck in doldrums’

Activity levels declined in June, according to a poll by the Royal Institution of Chartered Surveyors (RICS), with the weakest readings for new buyer enquiries and new instructions for more than a year and a half.

RICS revealed that some 22 per cent more surveyors reported price falls rather than rises in June, compared to 17 per cent the previous month, in its weakest reading since October.

And expectations for prices over the next 12 months fell further into negative territory, although the volume of transactions is expected to remain broadly flat.

The market has been hit by the end of a stamp duty holiday for first-time buyers in March, offsetting the introduction of the Government-backed NewBuy scheme designed to encourage the return of 95 per cent mortgages.

RICS chief economist Simon Rubinsohn warned activity levels will not significantly pick up until lenders demand smaller deposits from first-time buyers and offer lower interest rates to borrowers with small deposits.

He said: "The housing market didn't manage to turn a corner last month and activity remained in the doldrums.

"Although there is some positivity that the amount of sales going through is going to see an increase, it is unlikely that we will see any real movement until purchasing a property is more affordable and accessible for the likes of first-time buyers."

The survey came despite housebuilders having enjoyed a rise in sales and profits in recent months, with Bovis Homes today reporting an 18% jump in completions to 944 in the first six months of 2012.

But like many housebuilders, its gains have mainly come through focusing on building larger family homes in the south of England as it seeks to reduce its exposure to first-time buyers struggling to clamber on to the ladder.

The housing market has struggled since a stamp duty holiday for first-time buyers was withdrawn at the end of March, and as confidence was hit by the weakening economy and the ongoing eurozone debt crisis.

A balance of 12 per cent of surveyors saw fewer newly agreed sales, down from 5 per cent the previous month, and its third month of declines in a row.

There was also a slight decline in average sales per surveyor, which remain some 40 per cent lower than their peak in the boom five years ago as buyers struggle to find affordable mortgages. The number of homes on surveyors' books also edged down.

London, which has had strong demand from overseas buyers, was the only area where more surveyors reported price increases rather than decreases, continuing an ongoing trend.

The South East reported the smallest falls out of the rest of the country, which RICS said "reinforced the notion of a north-south price divide across England".

The West Midlands and East Midlands suffered the most negative price balances.