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Market to bottom out? - 12 August 2008

A possible small ray of weak sunlight reached the property market in the UK in the past couple of days, as one of the most influential bodies in the industry began to suggest that the worst of the property slowdown may soon be over.

The Royal Institution of Chartered Surveyors (RICS) has made the tentative and proviso-laden prediction in a new report this week, and suggests that activity in the UK property market may well be within sight of bottoming-out in the next few months. While this is hardly a reason for investors to be jumping around and celebrating, it is a fact that with things as they are, agents and developers are clinging onto any crumb of comfort and optimism they can.

The RICS report said that sellers were taking a more ‘realistic’ view of the property market and being more flexible in their pricing and their attitude to offers. At the same time, a ‘slightly’ raised number of people are visiting estate agents, giving the market renewed hope that there will be at least some movement in the coming weeks and months. Torpor and inactivity have been the biggest problems for agents since the beginning of 2008, with lack of sales driving confidence away from the industry, and seeing sellers become ever more desperate.

There is, however, still a stinging lack of available finance options for buyers, and those who can find a mortgage lender are suffering some of the tightest lending criteria experienced in recent times. RICS has also pointed out that first-time buyers are becoming ‘an endangered species’ as banks and building societies demand higher deposits to lend mortgage finance. The Bank of England has reported a 70 per cent fall in the number of new mortgage approvals in recent months, compared to the same time last year – a reflection of both the lack of confidence in the market and the paucity of mortgage products for borrowers.

Ian Perry, spokesperson for RICS, commented to The Independent that, "The lack of mortgage finance has brought the housing market to a virtual standstill, with first-time buyers rapidly becoming an endangered species. Going forward, there are signs that sale activity might pick up a little as sellers start to revaluate unrealistic asking prices."

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