In its 2008 housing forecast published today, the body says that house prices will plummet by around 5 per cent.
RICS says in September last year it lowered its forecast for house prices in 2008 to zero but as the liquidity squeeze has not eased since then, it says that it now looks likely that the downturn in the market will prove a “little more protracted” than it originally envisaged.
It says that distressed sales are likely to become a little more commonplace but will not characterise the market in the way they did during the last downturn.
Its report suggests that the peak of the payment shock for two year mortgages has already happened and the impact is now lessening.
RICS says there has been little evidence that the problems in the mortgage market will bring about a renewed wave of forced selling of property. It says that new instructions to sell have declined in ten out of the last eleven months.
It says its analysis suggests that homeowners are now rather less vulnerable to such an outcome than they were during the last downturn.
RICS says: “Despite the predictable tales in the media of reckless lending, mortgages worth 100 per cent or more of a property’s value have not been particularly common during this cycle. Indeed, we estimate that the average loan to value ratio between 2005 and 2007 was in the region of 85 per cent compared with 90 per cent in the 1985 to 1989 period.”
It says that recent secured lending has been dominated by repayment mortgages. In the three years to 2007, 71 per cent of first time buyer mortgages were made on a capital and interest repayment basis, compared with only 17 per cent in the three years to 1989.
RICS says the collapse in transactions is the most worrying. “This could have important ramifications for the wider economy not only hitting the property industry directly but also impacting on a broad range of the related sectors whether that it the high street purveyors of home furnishings and white goods or financial intermediaries involved in providing adviser on mortgages.”
“Our analysis shows that a halving in sales volumes this year could lower spending on consumer durables by more than 8 per cent compared with 2007.”