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UK Housing Market Improves Slightly in May: RICS

Reuters
Tuesday, 10 Jun 2008 | 5:57 AM ET

Sentiment in Britain's housing market improved marginally in May, a survey showed on Tuesday, but prices continued to fall at close to their fastest rate in at least 30 years.

The Royal Institution of Chartered Surveyors said its house price balance was -92.9 in the three months to May, against a record low of -94.7 in April. Analysts had expected further signs of deterioration in Britain's house prices.

Tuesday's data showed some signs of recovery and threw up no indication of forced sellers, but with more properties left unsold and the headline number close to historic lows, falling house prices will remain a concern for the Bank of England as it weighs inflationary pressures against a slowing economy.

The ratio of completed sales to the stock of unsold property -- regarded by some economists as a more reliable gauge of the health of the housing market -- fell to 19.3 percent in the three months to May from 21.4 percent in April, as the market hit its worst conditions since December 1995.

"Although this indicator of market slack has now slipped through levels touched in 2005, it remains comfortably above the lows seen in the early 1990s, when it briefly dropped to 11.4 percent," RICS said in the survey.

Market watchers have fretted over the possible emergence of distressed sellers if mortgage arrears rise and employment drops, but Tuesday's data showed there was still no sign of the wave that battered prices in the 1990s.

Sellers are still reluctant to put their homes on the block and the survey showed new instructions to sell dropped for the fifth straight month and at the fastest pace since last June.

New buyers, however, also remained in short supply. Tuesday's data showed enquiries dropped for the eighteenth consecutive month, though the pace of the decline eased, particularly in the North and North West of England and London.

Newly agreed sales also continued to drop.

Confidence in the outlook for sales, however, recovered slightly in May, with the net balance of surveyors expecting a drop over the next three months improving to -15 from -16.

There was also improved confidence on prices, though RICS pointed to a "widespread perception" that prices will fall further in the near term.

Britain's biggest mortgage lender HBOS has said the average cost of a house fell by 2.4 percent in May, taking the total decline since prices peaked in August to almost 8 percent. Derivatives data, however, show prices could continue to fall until 2011, by which time they will have lost around 30 percent.

South East England saw the sharpest drop in prices in May, RICS said, followed by East Anglia, Yorkshire and Humberside and the North West. Scotland remained the least affected with a balance of -22, while London reported a balance of -75.

The balance reflects the portion of surveyors expecting or reporting a rise against those expecting or reporting a fall.