A slump
in home sales this year is set to take a damaging toll on the wider economy as
the credit crunch bites, the Royal Institution of Chartered Surveyors (RICS) warned.
Housing sales could fall at least 40% this year as would-be buyers struggle to
gain mortgage deals from more cautious lenders, according to RICS' latest housing
forecasts. And the drastic
fall-off in deals could hit consumer spending by more than 8% compared with last
year, the organisation suggests.
RICS
chief economist Simon Rubinsohn said: "This could have important ramifications
for the wider economy - not only hitting the property industry directly but also
impacting on a broad range of related sectors, whether high street purveyors of
home furnishings and white goods or financial intermediaries involved in providing
mortgage advice."
The
warnings follow figures from the Council of Mortgage Lenders (CML) showing the
number of loans for house purchases plunging to 142,000 between January and the
end of March - the lowest on record since the first quarter of 1975.
RICS
predicts house prices will fall around 5% this year, a more modest decline than
some forecasts. It says the market will escape the slump of the early 1990s because
of a lower number of distressed sellers compared with 15 years ago, when homeowners
were struggling with soaring interest rates.
The
fundamental shortage of housing - exaggerated by recent decisions from major builders
to shelve projects in a cooling market - will also limit the impact of price falls,
it argues.
RICS
added: "Homeowners are less vulnerable to repossessions than during the early
1990s housing market crash. There is little evidence in RICS analysis that distressed
sales, which characterised the 1990s, are picking up."
The
organisation predicts repossessions will rise to 43,000 in 2008, although these
peaked at nearly 76,000 during 1991.
But
Mr Rubinsohn added: "The second half of 2008 will prove a difficult period
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
