Economic fears hit housing supply

Fears over the outlook for the economy saw the supply of housing contract in September, according to new research.

The latest market survey from the Royal Institution of Chartered Surveyors (RICS) shows a balance of five per cent of its members said the supply of homes had declined last month.

Surveyors said economic worries and fragile consumer confidence meant many households are thinking twice before putting their property up for sale.

Nevertheless, there was a marginal increase in new buyer enquiries last month, with a balance of three per cent of RICS members saying more househunters had come through their door.

However, respondents said that while more mortgage products are becoming available, the large deposits required to secure a loan continue to act as a barrier for many prospective buyers.

Despite this, the average number of sales per surveyor increased slightly in the three months to August, edging from 14.1 to 14.5.

Overall, a balance of 23 per cent of surveyors said prices had declined during September. Another 23 per cent expected values to continue falling over the next three months. The outlook for prices was negative in every area of the UK, including London.

Sales expectations remained positive with a net 12 per cent of RICS members predicting an increase over the final quarter as turbulence on financial markets encourages investors to return to bricks and mortar. However, the balance was down from 16 per cent in August.

RICS housing spokesman, Michael Newey, said: "Falling supply of fresh stock is indicative of general fears overhanging the economy, with many potential sellers preferring to stay put for now. As a result, the UK housing market remains pretty flat with activity generally subdued.

"Although it is hard to see what will give the market a lift in the near term, the announcement of a further raft of quantitative easing from the Bank of England will help to at least keep mortgage rates down. This, if nothing else, should ease the pressure on existing homeowners and limit the risk of a material pick-up in repossessions."

The Bank announced on 6 October that it plans to pump an additional £75bn into the economy in a bid to stimulate growth and prevent inflation from undershooting its two per cent target in the medium term.