The RICS office market survey for the final quarter of last year makes gloomy reading, with 33% more surveyors reporting a fall in demand for office space in the fourth quarter than reporting an increase.
Surveyors were even more pessimistic about prospects in the first quarter of this year, with 35% more expecting demand to decline than to increase, compared with 21% the quarter before. Surveyors in London and the South-east were the most pessimistic about the future.
RICS senior economist Milan Khatri said the results were the poorest since the survey began in 1994.
"The decline is mostly because of fears about the global financial turmoil that hit the City towards the end of last year. The impact has been marked – demand and confidence have both dropped sharply." Pessimism in the City sapped confidence from the rest of the South-east, he said. At the same time, confidence in office markets in the rest of the country stabilised.
Khatri is waiting for better news in the second quarter. "We're not too worried because of the fact that the pessimism is linked to the volatility of the financial markets towards the end of last year." "Since then, the [financial] markets have bounced back and we expect demand in the office sector may level off rather than decline further. We're expecting a recovery over the next three to six months." Meanwhile, the government's housebuilding figures confirmed a slump in the market last year.
Figures from the DETR show 178 300 homes were started in 1998, down 6% from 188 800 in 1997.
The drop in completions was slightly less significant, with 171 600 homes completed, down 4% on 1997.
Starts in the final quarter of 1998 dropped 10% on the same quarter in 1997 to 37 900, and 44 300 homes were completed, down 8% from the same period the year before.
Jim Turner, economist at Construction Forecasting and Research, said the housing market had been hit by the uncertainty about the economy at the end of last year.
"When people are worrying about their jobs, it doesn't do the housing market much good," he said.
He expected that last week's 0.5% cut in interest rates would help market confidence.
Economist Martin Hewes of Hewes & Associates is expecting a steady housing market this year. "Interest rate cuts will help, but they're being offset by the weaker economy. There's still not a lot of confidence around."