House prices have bounced back as the market absorbed the first round of interest rate rises, says the Royal Institution of Chartered Surveyors (RICS) in its latest UK housing market survey for March 2007.
House prices rose for the seventeenth consecutive month in March with the pace of increase picking up for the first time in five months. 25.5% more Chartered Surveyors reported a rise than a fall in house prices, up from 24.8% in February. The pace of increase remains above the long run average of 21.6% indicating that the housing market is still in rude health.
New buyer enquiries declined for the fourth consecutive month, albeit at a slower pace, as recent interest rate rises continue to eat into affordability conditions. 8% more Chartered Surveyors reported a fall than a rise in new buyer enquiries, up from 19% in February.
New instructions to sell property have risen for the first time in nine months, rebounding from the longest decline in seven years. However national figures appear to have been skewed by unusually large increases in new instructions in the North West and the East Midlands.
The stock of unsold property on surveyors' books fell to the lowest level since June 2004. Average stocks per surveyor were 60.1% in March compared to 62.4% in February, 16.8% lower than one year ago levels - the largest annual fall since July 2005. As a result, the ratio of completed sales compared to the stock of available property on the market rose to 47.8%, more than 11% higher than the survey's long run average of 37.1%, indicating extremely tight market conditions.
The strongest house price growth took place in Northern Ireland and Scotland, with London regaining the momentum lost in February. In the North West price growth picked up sharply but in the North and in East Anglia price rises slowed.
RICS spokesman, Jeremy Leaf, said: "The housing market has absorbed the initial interest rate barrage, but history tells us that further rate rises could knock confidence and activity significantly later in the year. However, house prices are unlikely to fall in the short term while the economic outlook remains robust. Market conditions remain tighter than ever with households as yet under no pressure to sell, though mortgage repayments remain a concern for many following the Bank of England's recent monetary tightening."
