Encouraging signs are appearing that people want to buy houses again - yet enquiries are still failing to convert into sales.
Good news - and bad
New buyer enquiries increased in February at the fastest pace since August 2006, says the Royal Institution of Chartered Surveyors (RICS). But the bad news is that agreed sales and sales per surveyor continue to fall.
RICS believes that the falls in Bank of England base rate are stoking consumer interest in buying homes. The implication is that without mortgage lenders making loans more readily available, buyer interest is unlikely to be converted into a big increase in sales for the foreseeable future.
On balance, more surveyors expect house prices to fall further than expect them to rise immediately. That negative sentiment seems to be shared with house sellers. Despite the shortage of house sales, the stock of unsold properties on surveyors' books has fallen. This suggests that some owners have withdrawn properties from the market, while other owners are reluctant to put properties up for sale in current conditions.
Shortage of supply
This shortage of supply has encouraged up-market estate agents Savills to present a more optimistic picture. Savills believes that house prices may now be on the verge of rising. Savills believes that the market fall will reach its bottom at 25% below peak prices in the regions and 30% below peak with prime London properties. In the distressed property market, says Savills, price falls have now reached those levels, while the mainstream market is showing falls in value of between 15% and 20%.
"We could now be about to enter the latter stages of house price falls and be on the brink of the first stage in the recovery process," says Yolande Barnes, head of residential research at Savills. "This is characterised by low supply as well as low demand levels, which causes prices to bottom out.
"We have already seen a pronounced recovery in affordability, thanks to both price falls and reduced interest rates, which sets the platform for a recovery when macro-economic conditions are right. However the return to house price growth will be a faltering process and further bad news on the economy, particularly that which increases fear of unemployment, is likely to delay the point at which static prices turn to price growth."
Prime stock will do best
Barnes adds: "It is prime stock that is likely to first see an upturn and that will characterise the second stage of recovery." But she warns: "It is becoming increasingly likely that the worsening economic climate will have the effect of pushing out the timing of recovery from our earlier projections, perhaps by 12 months."
To put it another way, even the optimistic version of events has a pessimistic sting in the tail. That interpretation is confirmed by the latest house price figures published by the largest UK mortgage lender, the Halifax. Having shown a surprising 2% average house price rise in January, its index reported a 2.3% fall in February. The underlying trend on the last quarter was a 3.6% fall.
Another difficult year
Halifax's housing economist Martin Ellis says: "Whilst market activity remains at very low levels, there are some tentative signs that activity may be beginning to stabilise. The house price to earnings ratio - a key measure of housing affordability - has fallen to its lowest level for six years. Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are, however, likely to mean that 2009 will be another difficult year for the housing market."