The average number of transactions per surveyor showed little fluctuation in January, despite buyer interest rising for the third successive month, according to RICS UK Housing Market Survey for the three months to January 2009.

Key points:

• Price expectations deteriorate; sales expectations turn positive

• Sales to stock ratio rises for the first time since September 2007

The seasonally adjusted balance of surveyors reporting falling rather than rising prices worsened from 73.9 to 76.3 in January.

The main factor that is depressing prices is still the large stock of property on estate agents books relative to the pool of able buyers.

On the activity side, new buyer enquiries increased for the third consecutive month and at the same pace as last month. Meanwhile, completed sales per surveyor (over the last three months) were broadly flat on the month (they fell fractionally from 10 to 9.9).

Although underlying activity remains weak, the turnaround in enquiries indicates that some level of buyer interest is returning to the market. This can partly be explained by recent sharp cuts in the base rate and the fall in house prices seen over the last year which has boosted affordability.

The average inventory of stock on surveyor’s books fell from 77.9 to 75.4 in January. Stock levels have been falling over the last year as vendors turn to rental market, opting to let their properties instead during the current climate. Stocks levels are now 10.4% down on year ago levels, marking the first annual decline since October 2007. At their peak in March 2008, stocks were up by 49.6%.

Given the proportionally smaller fall in average sales per surveyor, the ratio of completed sales to the stock of unsold property on the market – a gauge of market slack and a lead indicator of future price changes – increased slightly from 12.8% to 13.1%. This is the first increase in the sales to stock ratio since September 2007, but it remains close to its lowest level since December 1992.

Confidence in the sales outlook turned positive in January, but it remains below the surveys long run average. In England and Wales, sales expectations are now positive across all regions except the North, North West and Wales. Sales expectations are highest in London and the South West. Confidence in the price outlook fell deeper into negative territory, reaching the lowest level in the survey’s history. In England and Wales, price expectations deteriorated further across all regions except London and the North West.

From regional perspective, the price balance improved in the South East, the North and the North West. Elsewhere across England and Wales, the price balance deteriorated. Whilst still very depressed the price balance reached in highest level since September 2007 in Northern Ireland. The price balance improved in Scotland.

Source: RICS