The UK housing industry has been underperforming for last few years due to lack of property demand, rising inflation, tight lending process, and slowdown in global economy.

A survey conducted by the Royal Institution of Chartered Surveyors (RICS) in January 2008 revealed that the house prices in the UK reached the lowest level since 1990’s housing market collapse, as reported by Timesonline on February 13, 2008.

In fact, the number of surveyors who have reported fall in housing market overtook those who have reported rise by 54.7% last month. This is sixth time since August 2007 when falls have surpassed the gains. Moreover, the negative balance was highest last month since November 1992 and reached to 60.1%, while in December 2007, the figure was 49.1%, up by 3.1% in August 2007.

As per the industry experts, the underperformance of the UK housing industry last month has raised concerns about a sharp correction in the backdrop of strict lending practices and stretched affordability due to heavy credit crunch. Moreover, lack of demand for properties against lack of supply has also contributed for price falls because credit crunch is preventing buyers from investing in the market.

Another reason for weak demand in the housing industry is increasing inflation. According to the Office for National Statistics (ONS), the inflation rate in January 2008 touched the highest level in last seven months. The main reason for rising inflation in the country are rising global oil prices and increasing food prices.

Besides, property dealers and agents are feeling uneasy owing to tightening process of mortgage lending which has made it difficult for consumers to get loan and creating uncertainty among potential buyers.

Considering the miserable conditions of the UK housing market, Jeremy Leaf, a spokesman for RICS, said that banks had pass on the Bank of England’s 0.25% rate cut to borrowers if demand was to be stimulated, as reported by Timesonline on February 13, 2008.

According to a Senior Research Analyst at RNCOS, “The dwindling UK housing industry is threatening to worsen the economic slowdown in the country. To overcome from this tough time, home dealers should draft policies that attract customers to buy new homes. Home dealers should take initiatives to make home loans easier for consumers along with affordable installments so that the demand for property remains steady.”