Set aside the nonsense about the return of gazumping in the UK. Ignore estate agents telling prospective homebuyers they will have to move fast to snap up the bargain that has languished unsold since last summer. For as far as “signs of stabilisation” go, the news from the Royal Institution of Chartered Surveyors, which may even have boosted sterling, was pretty unconvincing. The balance of surveyors reporting house prices drooping further rather than zooming off again is certainly falling, but it remains spectacular.


Dig into the numbers of Rics’s May housing market survey and it is clear that most valuers remain resolutely gloomy. The seasonally adjusted net balance of surveyors reporting falling prices narrowed again in May and is now almost half the levels it reached in June last year. But the latest reading of -44.1, still well in negative territory, is around levels seen during much of the early 1990s correction. Celebrate that if you like. True, some more forward-looking measures are picking up. The RICS survey also contains more definitive signs that the rebound in enquiries underway for the last seven months is now feeding through into increased transactions.

But the extraordinary jump in two-year swap rates – up 50 basis points in the last week – is pushing up bank financing costs. If lenders attempt to recapture the lost margin, particularly for the fixed-rate deals priced off swaps, many borrowers will find it difficult to make the maths work on purchases of a slice of Britain’s still overvalued housing stock.

Two-year futures for the Halifax house price index, which notched up an unexpected, and perhaps one-off, rise last month, no longer suggest a further fall of the order of 20-25 per cent, merely one of about 10 per cent. But as affordability ratios deteriorate because of higher financing costs, and as rising unemployment triggers more forced sales, would-be homebuyers have little reason to fear a return of the housing bubble. The correction still has further to run.

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