Something quite significant in the UK housing market may have happened in December. For the first time since December 2009, it appears new enquiries, that’s people coming in to estate agents and expressing an interest in buying, rose at a faster rate than new instructions, or so says the latest report from the Royal Institution of Chartered Surveyors (RICS).

The RICS headline index (that’s the index that is produced by asking surveyors if prices were up or down in their area, and taking the percentage number who said down away from the percentage number who said up) was minus 39. Okay, the index is still deep into negative territory, but the index was even more negative in October and November. The RICS index has been negative for six months in a row now, and is unambiguously pointing to price falls, but the trend may hint at what will happen next and the current trend is suggesting pressures are easing.

The RICS index tracking expected price changes in the month ahead improved, rising from minus 41 to minus 29. The index tracking new instructions fell from minus 4 to minus 14, the lowest reading since May 2009. The index tracking new enquiries was negative, too – remember, this index relates to demand, but at least it improved over the previous month, rising from minus 18 to minus 12.

Maybe the key index is the one that tracks the number of properties for sales versus the number of properties being bought, or the sales to stock ratio. Well, this improved, rising from 21.3 per cent to 21.5 per cent.

Mind you, the stock of property inventory versus sales is still pretty high. Aside from the depths of the recession in 2008, the last time the ratio of sales to stock was as low as it has been over the last few months was in the mid 1990s.
What we are seeing here is a property market crawling along bottom – bottom in terms of activity, that is, not necessarily in price.

Demand is incredibly low, but then not many people are selling either.
In the short term the key to prices will be which one is the greater, incredibly low demand or incredibly low supply.

But in the medium and longer term, affordability counts. As more Brits use their credit cards to pay their mortgage, as baby boomers approach retirement and consider downsizing to fund their retirement from the profit they make from the sale of their home, and as interest rates rise, which they will eventually, the fundamentals will point to supply outstripping demand, and prices will fall.

Firstly, what happened to average house prices in December? Well, according to Hometrack, Nationwide and Halifax, respectively they fell 0.4 per cent, rose 0.4 per cent and fell 1.3 per cent.

As for the year, and in the same order, they fell 1.6 per cent, rose 0.4 per cent and fell 1.6 per cent.

According to Hometrack, in December demand fell by -4.8 per cent, and supply fell by -1.5 per cent.

Although it is clear demand growth has been way behind supply growth for the last six months or so, there are signs the gap is closing. Those saying house prices will be flat in 2011 are basing this prediction on the assumption that the contraction in new supply will accelerate.

The Halifax said: “Looking forward, we expect limited movement in house prices during 2011 but with the risks on the downside. Interest rates are likely to remain very low for some time. This will continue to support a favourable affordability position for those entering the market and limit financial pressure on existing homeowners to sell. Current signs that homeowners are becoming more reluctant to sell would, if continued, help reverse the imbalance between buyers and sellers. Nonetheless, uncertainty about the economy, weak earnings growth and higher taxes could put some downward pressure on demand.”

The Nationwide said: “There is little to indicate that buyer demand is set to pick up materially from current levels. At the moment, there are probably still too few buyers chasing too many properties. As a result, the slow drift down in house prices is likely to persist in 2011, at least for the first half of the year. Whether it continues into the second half will depend on the flow of new property onto the market. If this dries up – as it did in late 2008 and early 2009 in response to weak demand conditions – prices may begin to stabilise again….On balance, a relatively stable picture, with the possibility of a small price decline, appears the most likely outcome for 2011 at this stage. However, the experience from 2009 – when house prices were widely expected to see a large fall and then ended up rising by 6 per cent – illustrates the uncertainty of the outlook and shows that anything is possible.”

Hometrack said: “Looking ahead to 2011, house prices are likely to remain under downward pressure for the first half of the year. Weak demand and falling supply will be the defining features of the market. Lack of mortgage finance and falling consumer sentiment are trends that will continue into 2011.” Hometrack then added that it “expects house prices to fall by -2 per cent in 2011.” But then added further “Factoring in limited growth in real household incomes” it expects to see house prices tracking sideways for the foreseeable future.

The truth is, households are skint. A survey out last week showed that an increasing number of homeowners are using their credit card to make some mortgage payments. This cannot continue. House prices, relative to what people can afford, are still way too high. But the key lies in supply. Falling household affordability may mean we will see a rush of properties coming on the market, as their owners have no choice but to sell – we may see a rise in repossessions. On the other hand, if households find a way of managing, then supply will be limited and house prices will be propped up.

As for the long term, house prices remain way too high. According to Bank of England figures, the ratio of average house price to rent is around 50 per cent higher than the historical average since 1970. But bear in mind that while you may be able to justify high mortgages because interest rates are low, you can’t use this cheap interest rates argument to justify high rent. And for as long as house prices are so high, they remain vulnerable to a crash.

So, what will house prices do next?

“Although house prices are likely to continue to slip over the coming months,” says RICS, “falling supply should provide a platform for the market to stabilise at some stage in the first half of 2011. Indeed, by the latter part of the year, prices could be edging up again, with the result that by the end of 2011, they may not be very different from where they currently stand.”

Its argument makes some sense. There have been growing signs of late that the supply of new properties coming on the market has been dropping off. For example, Hometrck recorded a 0.4 per cent drop in the number of properties for sale last month, and said it expects falling supply to support prices next year. The latest housing survey from RICS had its index tracking new instructions going negative.

Of course, demand is incredibly low, too. Mortgage approvals are falling rapidly again, and just about all analysts reckon next year will be a very quiet year indeed for the UK mortgage market. So what we are really seeing is a race to the bottom. Demand and supply are falling. If demand falls faster than supply, prices will drop; if supply falls faster than demand, prices may well rise.

Calling how the dynamics between these two variables will pan out next year is a mug’s game.

But two factors could influence supply over the medium term. First off is repossessions.

RICS reckons repossessions are likely to fall back marginally next year. It says: “In 2010, around 36,000 were taken into possession by lenders, but claims issued in the third quarter (the first stage of the possession process) were 26 per cent lower than in the same period of 2009.” In fact, RICS estimates that the number of properties taken into possession will slip in 2011 to 33,000.

The Council of Mortgage Lenders by contrast reckons 2011 will see slightly more repossessions, with 0.35 per cent of mortgages ending up in possession next year, against 0.32 per cent in 2010.

But the point is, both the CML and RICS are expecting only very small changes to repossessions. If they are right, it seems the impact on supply from enforced sales might be quite modest.

But, on the other hand, according to the Bank of England’s latest financial stability report, if interest rates were to return to 5 per cent, the ratio of household interest payments to income would return to the recent peak seen in 2008.

So, in other words, for as long as rates are at their all-time low, house prices are relatively immune from a crash, and we will not see a rush of properties coming on the market after being repossessed.

But, this week, the CBI has forecast interest rates reaching 2.75 per cent by the end of 2012, and yesterday, MPC man Paul Fisher told the Telegraph that the MPC wants to see rates return to normalised levels as soon as possible, and by normalised levels he is talking roughly 5 per cent.

Mr Fisher said: “We hope people are aware that interest rates at some point will go up again and that they will head back to a normalised position…What we need to do is to trigger the mindset in people that that’s where rates will eventually go back to.”

And that’s the ticking bomb. Rates will go up eventually, and when they do, households will find themselves with an awful lot of additional interest payments to find. And bear in mind too that it seems likely next year growth in average incomes will lag behind inflation.

But there is a second factor that could influence the supply of housing stock, and that is the actions of landlords. It seems clear that over the next few years first-time buyers will struggle more than ever, so one assumes demand for rentals will rise.

At the same time, it seems likely that next year and 2012 will see investors go in search of more yield. They are sick of low interest. Shares are looking attractive because dividends are relatively high compared to the yield on bonds.

One assumes that investors seeking yield will look at property, too.

But here is the snag. According to the Bank of England figures, the ratio of average house price to rent is around 50 per cent higher than the historical average since 1970.

In other words, to really pull in property investors, house prices need to be cheaper. (Either that, or rents must go higher. But, given that growth in average wages is currently lagging behind inflation and households are getting worse off, it is surely unlikely tenants will be either willing or able to pay higher rents.)

This may seem counterintuitive. Traditionally, buy-to-let investors like to see house prices going up.

But for institutional investors, it is different. These investors want cheap prices, high rent. And the lower house prices are, the higher the demand from this sector.

And that’s why we reckon that in the medium term, house prices have a lot further to fall.

See chart 3.15 from this report: Credit risks to the banking system

Mr Oldham said: “2011 will be the first for 12 years during which the FTSE 100 breaks into new ground, finishing the year at or above 6,750. As businesses look forward to a leaner, more efficient post credit-crunch world, investment and earnings will rise on the back of continued low interest rates. However, the year will not be without serious volatility, particularly due to successive crises in the Eurozone leading ultimately to some disorderly restructuring.”

He also predicted rises in sterling, which could threaten the UK recovery, but said: “The UK market performed well in the 1980s with a strengthening pound and we think it may repeat this experience.” Finally, Mr Oldham predicted “a good recovery” for BP, that the service sector and mid/small caps will continue to do well on the back of potential merger and acquisitions activity, and said: “We favour Carillion, Centrica, Prudential and CPP. Our two favoured stocks for 2011 are Experian and, as our shortest term high risk play, Churchill Mining.” But said that fears over Eurozone debts will hit the banking sector, and that Lloyds Banking Group will probably be the first of the government-supported banks to be ready for a part flotation in 2012. He also expects another good year for Germany.

So much for equities and bonds.

What about the UK property market? Well, this grid pretty much sums up what CML reckons:

CML concludes that: “Activity in housing and mortgage markets is set to remain broadly flat in 2011 and we do not envisage a return to the lending levels that characterised the middle of the last decade for many years to come.”

CML may be right, but next year will almost certainly see average households become worse off as wage inflation lags behind retail price inflation. If the forecast from McKinsey Global is right, and global real interest rates are set to rise over the next few years, then beyond 2012 the outlook for UK house prices is very ropey. See: Interest rates set to rise as economic tectonic plates shift – is this good or bad news?

And frankly, there is much in the report to be bearish about. And yet one has to be honest about these things. The RICS housing market survey may be just about the best report out there for gauging the state of the UK housing market, and it may unambiguously be pointing to falling house prices for the next few months, but at the same time it is clearly not yet pointing to an outright crash in house prices. If anything, the latest report might suggest gentle falls in the year ahead.

Every month, the Royal Institution of Chartered Surveyors, or for those who find that a mouthful – RICS – asks its members whether house prices were up or down in their region over the last month. It takes the percentage who say up, the percentage who say down, and the difference forms its headline index. This particular index has long proven to be an excellent barometer guide. Unlike surveys from the Nationwide and Halifax, which swing wildly month on month, and can be distorted by apparently innocuous developments – for example, if sales of cheaper homes fall faster than sales of more expensive ones, then the average price goes up – the RICS survey appears to give a pretty accurate snapshot of what’s going on.

The latest RICS headline index rose slightly, but at minus 44, from minus 49 in October, is still deeply in negative territory and clearly points to falling prices – although not in all areas – no less than 45 per cent of those surveyed said there was no change last month.

The index that peeks one month ahead is similarly supportive of the bearish case. The index tracking expected price changes in the month ahead improved ever so slightly, rising from minus 42 to minus 41.

But actually, the data which lurks deeper in the RICS housing survey is invariably more interesting.

The index tracking new enquiries fell, dropping from minus 12 to minus 18. The numbers of transactions per surveyor were down too, falling from 15.2 to 14.8, and the number of properties on surveyors books was up, rising from 67.2 to 69.5. And finally, the sales to stock ratio fell from 22.6 per cent to 21.3 per cent, the lowest level since may 2009.

So far then, the picture is clear. Not only are house prices falling, but demand is falling, and the total amount of supply is rising.

Our doubts as to whether this implies a fully-fledged crash are on two fronts.
First, new supply is falling. The RICS index tracking new instructions scored minus 4 in November, the same reading as the month before. So sure, demand is apparently falling faster than supply, but you need to bear in mind we are talking very low numbers here. Both demand and supply are very low. It will take only a small change in the two variables, and we could see their relationship change.

The fact is, the RICS index tracking new enquiries has been lower than the new instructions index every month this year. Clearly this is creating pressures that will lead to falling prices in the months ahead, but there are good reasons to suppose the new instructions index will decline much further as prices fall. This is what happened in 2009, when, paradoxically, house prices fell even though we were in the midst of recession.

There is nothing in the latest RICS data to suggest we won’t see a repeat of those circumstances later next year.

Another point about the RICS data is that while the number of properties for sale on surveyors books is rising, the total backlog of unsold property is nothing like as large as it was in early 2008, when the typical number of properties on surveyors books was around 90.

To repeat, the RICS housing market survey for November suggests house prices will fall for the next few months. But whether the falls we are about to witness turn into an outright crash will depend on what happens to incremental demand and supply over the next few months. For as long as new enquiries are less than new instructions, then the inventory of unsold property will rise. But we will have to monitor this report closely over the next few months to see how this relationship develops.

However, there is another fact here, and this time the data has nothing to do with RICS.

For our money, 2011 will be characterised by a sharp drop in household disposable income. It is too early to say whether job losses in the public sector will exceed or fall below jobs created in the private sector, but it does seem clear that for much of 2011 inflation measured by the retail prices index will exceed increases in average wages. In the recession, we saw interest rates fall, making debt repayments for the UK’s primarily indebted populace fall, making them better off and largely counteracting the effect of rising unemployment or falling wage inflation.

And that brings us to the latest data from the ONS. This morning will reveal the latest data on inflation and tomorrow data on average wages. We will let you know what the data says

Well, it won’t surprise you to learn that it’s not pretty. Hometrack had house prices falling by 0.8 per cent in November, the fifth successive month of falling prices. Nationwide had prices down 0.3 per cent. The Bank of England had mortgage approvals for house purchases falling by 0.4 per cent in October.

The annual rate of house price inflation is now just 0.4 per cent, according to the Nationwide. It had prices rising by 0.5 per cent in December last year, which means, according to our maths, any reading of zero or less for December this year would mean that house prices would have fallen for 2010.  Actually, in fairness to the building society, it did predict that prices would be flat for 2010, so its forecast is looking pretty good.

Martin Gahbauer, Nationwide’s Chief Economist, seems to blame the credit crunch. He said: “In the 1990s the number of mortgages taken out for house purchase initially saw a large decline from unsustainable highs, it then settled close to the long-run average. In the current downturn, house purchase approvals have fallen to an all-time record low and are still close to 50% below the long-run average. This weaker profile of approvals is primarily due to the fact that the current housing downturn was accompanied by a global systemic banking crisis that limited the availability of credit. In the 1990s, by contrast, the banking system did not suffer a comparable crisis and the flow of credit did not become as constrained.”

But Mr Gahbauer had good news for property owners. He said: “There is little evidence to suggest that house price declines are likely to accelerate in the months ahead. Much of the weakness in property values since the Spring has been driven by a return of sellers to the market, following unusually low levels of property for sale in 2009 and early 2010. However, there is little to indicate that these sellers need to achieve a sale urgently for financial or economic reasons, which means that the downward pressure on house prices is only modest.”

As for the UK’s central bank, well its data certainly supports the Nationwide comments about house mortgage approvals. So far this year, this measure has fallen in all but two months, but has been negative or flat for the last six months. On an annual basis mortgage approvals for house purchases are down 16.9 per cent, and now stand at an eight-month low. Total mortgage lending did rise ever so slightly, but remains 8.9 per cent down on a year ago.

But the more serious findings were supplied by Hometrack. The number of new buyers registering with agents fell by 4.3 per cent, while the number of new listings also fell, but by just 0.4 per cent. Property bulls may be able to draw some hope from the fact that new property listings have now gone negative too, and for the first time in nine months, according to Hometrack data. This is a trend, by the way, which is also supported by findings from the Royal Institution of Chartered Surveyors, which recently recorded the first negative reading since January for its new instructions index.

Richard Donnell, Director of Research at Hometrack, put it thus: “Looking ahead the real impetus to reduced supply is set to come from agents. Over the coming months estate agents will be turning their attention to the supply of homes on their books, anxious to adjust stock levels to realistic prices more closely aligned to demand. The reality is that in the months ahead vendors will either need to reduce prices or withdraw property from the market.

“This is a process that will run over the next 3-6 months and will result in a gradual tightening of supply, a trend that will act as something of a support to prices over the course of 2011. In the near term we expect demand to remain weak and this will continue to put downward pressure on prices in the coming months. Over the course of 2011 we expect average house prices to decline by -2%.”

But you know what, there is another factor that seems set to push down on house prices next year. The real problem is surely that next year, your average household will be worse off. We have touched on this theme many times before. Just to remind you, then, during the recession, average households were no worse off. No wonder the house price crash went into reverse in 2009. But, next year and in 2011, and it appears in 2012 too, average earnings growth will lag behind inflation as measured by the retail price index . According to the latest Office for Budget Responsibility report, it won’t be until the end of 2015 before real wages have returned to their 2009 level. In such an environment, house prices will come under enormous pressure.

For more, see: A household debt crisis or corporate savings crisis?  and Lord Young is right, technically: UK households have never had it so good

The RICS headline index, produced by taking the percentage number of surveyors who said prices were up in their area last month, and subtracting from that the percentage number who said they were down, fell to minus 49 in October, the lowest reading since April 2009. The index tracking expected prices also fell, down to minus 42.

But for our money, it’s the indices tracking new enquiries, which relates to new demand, and new instructions, which relates to new supply, that seem to be the key.

The new instructions index has enjoyed a higher score than the new enquiries index for every month this year. And so it was in October, with the new enquiries index falling from minus 2 to minus 12, while the new instructions index stood at minus 4.

It takes time for the dynamics of new enquiries and new instructions to show up in prices. And the house price changes we are seeing now may well be a function of what happened with new instructions and enquiries several months ago. And since new instructions have been exceeding new enquiries for some time now, the implication for average price for the next few months is clear: it will fall.

But the October data seemed to highlight a new and quite important development.

The fact is, the gap between the two indices has been falling for several months, and in October we saw the difference between new instructions and enquiries fall to the lowest level since April.

The month also saw the new instructions index go negative, meaning more surveyors witnessed a fall in new instructions than witnessed a rise. It was the first time this had happened since January.

We observed a similar but opposite trend 18 months ago, when the new enquiries index went into decline while the new instructions index improved. We said at the time that if the trend continues, prices will fall. Well, the trend did continue, and now prices are falling.

If the trend seen over the last three months or so continues, then prices should start to rise next spring or summer.

This argument is supported by evidence from Rightmove, which reckons to have observed a pick-up in the number of first-time buyers.

On the other hand, next year won’t be a good year for British households. This year has seen private sector workers enjoy wage rises which were significantly less than inflation. Next year, public sector workers, too, will suffer this fate. VAT is going up, too. All in all then, the average household will be worse off next year. In such circumstances it is hard to see how house prices can rise, or if they do, how they will rise in any significant way.

But while the argument that house prices will inevitably fall as they are simply too high, may seem quite persuasive, until institutional landlords enter the British property market to enjoy the high yields that low prices provide, and start funding new builds, house prices will not hit a logical and sustainable level in the UK.

In fact, after falling 3.6 per cent last month, the biggest monthly fall ever recorded by the Halifax, it would have been a real surprise if October didn’t seen some kind of bounce back. Indeed, this column said as much before, describing the September fall as rather “freakish looking”.

Martin Ellis, housing economist at Lloyds said: “Prices in the three months to October were 1.2% lower than in the preceding three months. This measure gives a better indication of the underlying trend in house prices than the monthly changes. There has been a very mixed picture of monthly house price rises and falls throughout 2010, which continued in October with prices rising by 1.8% following September’s decline, reflective of flat house prices. The rate of decline in prices on the three month-on-three month measure is markedly less than the quarterly declines of more than 5% recorded during the second half of 2008.”

He is right, house prices are not falling like they were in 2008. But then again, during the recession, thanks to lower interest rates, the average household was no worse off after debt payments than at the peak of the boom. It is not like that now, and household income is looking decidedly stretched.

If you missed these articles, see: House prices second dip gains momentum , and The US and UK economy may be growing, but households are suffering a nasty hit , which were published earlier this week.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. Sometimes amusing, frequently contrarian, often thought provoking, and always informative, Investment and Business News is free. To subscribe, click on the subscribe function at the top right hand corner of this page. By the way, did we say it’s free?

The Nationwide was the first of the triumvirate to release its report. According to the building society, house prices were down 0.7 per cent in October. Over the last five months it has had prices falling (three times) or flat.

The Nationwide has annual house price inflation at 1.4 per cent, and now has the average house price coming in at £163,381. The average price at the end of last year was £162,103, meaning prices only need to fall by around 1 per cent over the course of November and December for the index to be negative for the year. Actually, at the beginning of this year the building society did predict that the index would be flat for the year, so it does look as if its estimate was pretty accurate.

The Bank of England’s latest data on lending to individuals was out on Friday too.

Approvals for house purchases fell by 0.1 per cent in September from the month before, but on a year on year basis were 14.9 per cent down. The month did see a slight rise in remortgaging, and remortgage activity is at its highest level since July 2009. But overall, the month saw 99,656 mortgages approved. This number has barely changed in two years, whereas back during the boom, total mortgage approvals were typically around 300,000.

Mind you, there was no surprise in the Bank of England’s findings. A couple of weeks ago, the Council of Mortgage Lenders said that gross mortgage lending in September was at its lowest for the month since 2000. According to the BBA, the number of loans for house purchases was down 26 per cent on a year ago. See: Mortgage lending approaches cliff edge  

And finally, there was Hometrack, whose latest report was out this morning. It has prices falling by 0.4 per cent, the lowest monthly fall it has recorded since March 2009. Hometrack has a pretty simple and clear cut explanation for the fall: “Demand for housing dropped by -2.9% in September,” the third monthly fall in a row. Meanwhile, the supply of homes coming to the market has grown by 7.2% over the past three months.

The latest reading from the Halifax is due out soon, but last month their index saw its biggest monthly fall ever recorded. The next Halifax reading will probably be up, going some way to compensate for last month’s rather freakish looking fall. But the overall pattern from the Halifax is fairly self-explanatory: house prices are falling, and are falling pretty fast.

 So this begs the question, what next?

It is clear that demand is going to remain weak. Data on mortgage lending makes that clear, and in any case, common sense says that with wages lagging behind inflation, and VAT set to rise, demand will remain weak.

But what about supply?

 Both the Royal Institution of Chartered Surveyors and Hometrack have started talking about supply falling too. Hometrack said, for example: “Looking ahead we expect the supply of homes coming to the market to slow, limiting the potential scale of price falls in the next 12 months.” Last week, Josh Miller, RICS Senior Economist said: “Surveyors, in part, are anticipating that potential homebuyers could return to the market given the weaker trend in house prices.”

 Actually, second guessing whether demand or supply will out next is a mug’s game. During the depths of the recession, house prices rose because the very low level of demand was, nevertheless, greater than the level of supply.

Ironically, however, in the long run, the supply of housing may improve if prices fall. As frustrated would-be first-time buyers turn to renting, rents are rising. Property investors who are interested in income rather than capital growth, actually want house prices to be cheap, because their percentage yields will then rise. The key moment for the UK housing market may be that point when institutional investors move in and take to property investment as a source of income, much as they do in Germany. At that point we may see a surge in building activity, even if prices are quite cheap.

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According to the CML, gross mortgage lending in September just gone was at its lowest for the month since 2000. According to BBA, the number of loans for house purchases was down 26 per cent on a year ago.

CML Director General Michael Coogan said: “Lending volumes do not seem likely to increase substantially towards the end of the year. Funding pressures on lenders remain, and the practical implications of government and public spending cuts are beginning to emerge, with a resulting impact on consumer confidence.”

BBA statistics director, David Dooks said: “Demand for new mortgages remains low despite more properties on the market and falling house prices.”

According to CML, gross mortgage lending totalled an estimated £12 billion in September, down 1 per cent from £12.1 billion in August and down 7 per cent from September 2009 (£12.9 billion). The BBA says that while gross lending mortgage lending was down 10.8 per cent on a year ago, people are also repaying their mortgages in greater numbers too.

Paul Diggle, a property economist at Capital Economics, said: “There is little sign that confidence in the outlook for the housing market will improve anytime soon. Survey evidence continues to show that consumers expect house price growth to be flat or negative in the short-term. And housebuilders are reporting that a lack of buyer confidence is holding back demand for new build properties, a view endorsed by lenders in the latest Trends in Lending Survey last week. It is hard to see what might boost confidence. Thus a downbeat outlook for mortgage lending looks appropriate.”

But the key lies in data provided by the Royal Institution of Chartered Surveyors (RICS). Its most recent report showed the index tracking new enquiries rising from minus 17 to minus 2. Meanwhile, the index tracking new instructions rose from plus 12.1 to 22. But RICS made much of the fact that the gap between the two indices closed slightly last month. Well, the data from CML and BBA suggests enquiries will surely fall in the month ahead. Unless we suddenly see an abrupt change in the recent trend relating to instructions, this means the gap between the two seems certain to get bigger again, meaning new supply will surely outstrip new demand.

Investment and Business News is a succinct, erudite and informative roundup of today’s top news stories on business and the economy, with analysis thrown in. Sometimes amusing, frequently contrarian, often thought provoking, and always informative, Investment and Business News is free. To subscribe, click on the subscribe function at the top right hand corner of this page. By the way, did we say it’s free?