Rics: UK property prices continue to fall

House prices in the UK continued to fall during January, according the latest housing market survey from the Royal Institution of Chartered Surveyors (Rics).

The organisation's research finds some 54.7 per cent more surveyors reported a fall in average prices during January than reported a rise.

This represents the worst figure recorded since Britain emerged from recession in 1992.

The January findings compare to a net of 49.1 per cent of surveyors reporting a loss in December and illustrate the continuing and accelerating decline of the UK property market.

The largest price falls took place in the north and East Midlands, whereas the smallest took place in London and Wales.

The national drop has been caused by a weakness of demand from buyers, according to Rics.

The net total of surveyors reporting a drop in new buyer enquiries was up to 35 per cent in January - the worst since figure since October 2007, when the Northern Rock crisis was in full-swing.

"A lack of demand and confidence in the housing market is clearly behind the recent price slowdown. Tightening mortgage lending criteria is a block to many who are keen to take the housing market plunge," said Rics spokesman, Jeremy Leaf.

"Agents are finding it difficult to market properties to an audience which has decided to watch the current economic theatre from the wings."

New instructions to sell property also fell back into negative territory in January – perhaps as a result of the rush to get property in the market in December, before the implementation of the Home information pack (Hip) scheme.

These were made compulsory on all property as of December 14th last year.

However, the long-term picture for the market remains stable, according to Rics.

"If mortgage lenders filter the recent interest rate cuts into the market, demand should begin to increase," continued Mr Leaf.

"In the near term, the housing market will continue to be shielded from significant price falls while employment conditions are strong. The market need only fear a significant fall in prices if job loses start to multiply."

Yet, other analysts were less confident in the future direction of the market.

"The very weak January Rics survey will heighten concern that the housing market is headed for a sharp correction in the face of stretched affordability and tighter lending practices resulting from the credit crunch," explained Howard Archer, European economist with analysts Global Insight.

"Affordability is being pressurized by elevated house prices, modest real disposable income growth and the still significant overall rise in mortgage rates since August 2006.

"While lower interest rates should help matters over the coming months, we expect house prices to fall by five per cent in both 2008 and 2009."