House prices still down but sales spike brings optimism

(Update) House prices fell again in January but a boost in sales has left surveyors far more optimistic, according to new research.

Some 16% more surveyors reported falls rather than rises in house prices, the same number as in December and the lowest reading since July 2010, according to the Royal Institution of Chartered Surveyors (Rics).

West Midlands and Wales saw the biggest falls in prices. But of those surveyors reporting price drops, 82% claim prices are increasing by less than 2%. London and the North were the only two regions to report price rises. 

The number of sales, meanwhile, edged up in January as first time buyers rushed to beat the stamp duty holiday deadline in March, according to Rics. From 24 March first time buyers will no longer be exempt from stamp duty when purchasing property worth less than £250,000.

As a result 19% more surveyors expect activity to increase than decrease over the next three months, Rics said. That is the most optimistic surveyors have been since May 2010.

Yet despite this overall demand has fallen as buyers struggle to get a mortgage, demonstrating that the recent boost in activity is down to a one-off factor rather than a fundamental change in market conditions.

The number of new homes coming onto the market, meanwhile, continued to increase in January for the fourth consecutive month.  

Michael Newey, housing spokesman for Rics, said: ‘Many problems with the market still exist and the lack of affordable mortgage finance is still preventing many from getting onto the property ladder’.

Looking forward the majority of surveyors said they expect prices to drop further over the next three months.

Howard Archer, chief economist at IHS Global Insight, meanwhile said he expects house prices to fall 5% in 2012.

'We suspect that low wage growth, a markedly weakening labour market and major concerns over the economic outlook will limit potential buyers and weigh down on house prices,' Archer said.

Archer was commenting after separate figures from the government which indicated that house prices are rising. According to the Department of Communities and Local Government, which lags one month behind other indexes, house prices increased 0.4% in December and 0.1% over the year. 

Last week Halifax reported a 0.6% rise in house prices in January. Figures from Nationwide, on the other hand, showed a 0.2% decline, while Hometrack claimed prices remained flat.