This is according to Ed Stansfield, chief property economist at Capital Economics. Commenting, he said: “A net balance of 32% of surveyors reported house price falls in August. The weakness in August was widespread, with prices reported to have fallen in all regions bar Scotland.
“Nevertheless, the question of whether the market is experiencing a short-term wobble or the start of the second leg of the house price correction remains open. After all, the RICS past prices balance fell to similar or lower levels in 2003 and again in 2004/05 only to recover rapidly.
“In neither case did the other major house price indices fall to any meaningful degree. The fact that CLG reported a modest 0.3% price fall in July, taking the annual rate from 9.9%y/y to 8.4%y/y, does little to resolve the recent, conflicting Halifax and Nationwide reports.
“Yet the detail of the RICS survey appears to point to further weakness ahead. For example, at -17% the new buyer enquiries balance was negative for the third consecutive month and appears to be falling a little more rapidly than it did in 2007. The fact that, at -20%, the newly agreed sales balance was at a two-year low may suggest that buyers expect more falls to come.
“Consistent with that, the Nationwide consumer confidence survey, also released overnight, showed that consumers’ house price expectations turned marginally negative for the first time in over a year.
“Surveyors seem optimistic that further price falls will facilitate a rise in sales in the next three months. We are less convinced. After all, such an outcome seems at odds with the prospect of rising unemployment, tight mortgage credit conditions and the extent of housing market overvaluation.
“We think that house prices will have to fall considerably further before a sustained recovery in transactions can be expected.”
