Property sales may fall by 40% this year because of the credit crunch, the Royal Institution of Chartered Surveyors (Rics) has warned.
Property sales may fall by 40% this year because of the credit crunch, the Royal Institution of Chartered Surveyors (Rics) has warned.
In its updated forecast for the housing market in 2008, Rics also predicted that prices would fall by 5%.
In its updated forecast for the housing market in 2008, Rics also predicted that prices would fall by 5%.
Such a sales drop would represent the biggest shrinkage in the housing market since modern records began and could cut consumer spending by 8%, Rics said.
Such a sales drop would represent the biggest shrinkage in the housing market since modern records began and could cut consumer spending by 8%, Rics said.
The slowdown has also led to removals firms seeing a slump in business.
The slowdown has also led to removals firms seeing a slump in business.
Rics chief economist Simon Rubinsohn said the outlook was worrying.
Rics chief economist Simon Rubinsohn said the outlook was worrying.
"Money looks set to remain tight and many will continue to find that access to the market is restricted by cautious lenders," he said.
"Money looks set to remain tight and many will continue to find that access to the market is restricted by cautious lenders," he said.
"This could have important ramifications for the wider economy," he added.
"This could have important ramifications for the wider economy," he added.
Removals
Removals
Mr Rubinsohn said that a broad range of sectors related to the property market could also be hit, "whether that is the High Street purveyors of home furnishings and white goods or financial intermediaries involved in providing mortgage advice".
Mr Rubinsohn said that a broad range of sectors related to the property market could also be hit, "whether that is the High Street purveyors of home furnishings and white goods or financial intermediaries involved in providing mortgage advice".
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How the downturn in the housing market is affecting removal firms
How the downturn in the housing market is affecting removal firms
This is already happening to removal companies.
This is already happening to removal companies.
Martin Rose, a consultant to the National Guild of Removers and Storers, told the BBC its members had seen business slump recently.
Martin Rose, a consultant to the National Guild of Removers and Storers, told the BBC its members had seen business slump recently.
Moves were down by 55% in the first three months of this year, and down by 68% in the past six weeks.
Moves were down by 55% in the first three months of this year, and down by 68% in the past six weeks.
"Normally we would expect that after Easter that trade usually picks up, but this year it went completely the other way and I can almost use the word 'collapse'," he said.
"Normally we would expect that after Easter that trade usually picks up, but this year it went completely the other way and I can almost use the word 'collapse'," he said.
If the predictions of Rics turn out to be accurate than there will be around 700,000 fewer residential and commercial property sales this year than in 2007.
If the predictions of Rics turn out to be accurate than there will be around 700,000 fewer residential and commercial property sales this year than in 2007.
Credit crunch
Credit crunch
The slump in the property market this year has been caused by a combination of reasons.
The slump in the property market this year has been caused by a combination of reasons.
One of the major factor has been a decade-long boom in prices which has made buying a home unaffordable for many new buyers.
One of the major factor has been a decade-long boom in prices which has made buying a home unaffordable for many new buyers.
But the trigger for the slump has been the credit crunch in the banking system, which has forced mortgage lenders to ration their loans.
But the trigger for the slump has been the credit crunch in the banking system, which has forced mortgage lenders to ration their loans.
According to figures from the Department of Communities and Local Government (DCLG) the biggest annual fall in property sales so far was in 1989 when, in England and Wales, they fell by 26%.
According to figures from the Department of Communities and Local Government (DCLG) the biggest annual fall in property sales so far was in 1989 when, in England and Wales, they fell by 26%.
But sales are already down by 32% on a year ago, says Rics.
But sales are already down by 32% on a year ago, says Rics.
Repossessions
Repossessions
Many commentators have been forced to revise downwards their predictions for prices, with expectations of an overall fall during the course of 2008 now commonplace.
Many commentators have been forced to revise downwards their predictions for prices, with expectations of an overall fall during the course of 2008 now commonplace.
The head of the Building Societies Association recently warned that the property market might not recover for another two years, despite attempts by the Bank of England to free up inter-bank lending by injecting new funds into the banking system.
The head of the Building Societies Association recently warned that the property market might not recover for another two years, despite attempts by the Bank of England to free up inter-bank lending by injecting new funds into the banking system.
Despite this, Rics says homeowners are under less threat of negative equity and repossession than was the case in the recession of the early 1990s.
Despite this, Rics says homeowners are under less threat of negative equity and repossession than was the case in the recession of the early 1990s.
This, it says, is a result of recent borrowers having to put down larger deposits and paying off their loans with conventional repayment mortgages.
This, it says, is a result of recent borrowers having to put down larger deposits and paying off their loans with conventional repayment mortgages.
Rics said: "100% mortgages have not been as common, [we] estimate that the average loan-to-value ratio between 2005 and 2007 was in the region of 85% compared with 90% in the period between 1985 and 1989."
Rics said: "100% mortgages have not been as common, [we] estimate that the average loan-to-value ratio between 2005 and 2007 was in the region of 85% compared with 90% in the period between 1985 and 1989."
"In the three years to 2007, 71% of first-time buyers' mortgages were made on a capital and interest repayment basis compared to only 17% in the three years to 1989," it added.
"In the three years to 2007, 71% of first-time buyers' mortgages were made on a capital and interest repayment basis compared to only 17% in the three years to 1989," it added.
Even so Rics is still expecting repossessions to rise this year to about 43,000.
Even so Rics is still expecting repossessions to rise this year to about 43,000.
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