Clampdown on lending is crippling house sales

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by Kay Murchie

Property website Rightmove say the banks’ clampdown on lending, particularly to first-time buyers, is having a devastating affect on house sales.

Furthermore, a report by the Royal Institution of Chartered Surveyors (Rics) said a collapse in house sales over the next 12 months could cause a reduction in consumer spending by up to 8% and destroy the high street.

Spending on items such as home improvement products, furnishings and white goods, could decline significantly as the number of people moving home dries up, said Rics.

The organisation added that others to be hit would include estate agents. Recent reports have shown that estate agencies are closing due to the housing slowdown and the number of agencies has dropped from 13,000 to 12,000 already this year.

Solicitors who focus on conveyancing would also be affected, said Rics.

Rics warned that the number of house sales could fall by around 40% this year and added that the latter half of 2008 would be challenging for the housing market.

Money looks set to remain tight and many will continue to find that access to the market is restricted by cautious lenders. Demand will remain pent up, with many watching the high-street banks for any sign of a softening in lending criteria, according to Simon Rubinsohn of Rics

However, Rics is optimistic that house prices would fall by only 5% by the end of 2008. Many economists believe the drop could be as much as 30%.

Mr Rubinsohn homeowners are less vulnerable to repossessions than during the early 1990s’ housing market crash. There is little evidence in Rics’ analysis that distress sales, which characterised the 1990s, are improving.