Rics: House prices down for second consecutive month

Thursday, 11 October 2007 12:00 AM

House price growth has remained negative for the second successive month, according to information released today by the Royal Institution of Chartered Surveyors (Rics).

Some 14.6 per cent more surveyors reported a fall rather than an increase in average house prices during September.

This is an increase from the level of 3.3 per cent more surveyors recording a fall in August.

The findings demonstrate the fastest decline since September 2005, when 19.4 per cent more surveyors reported a fall in house prices rather than rise.

Surveyor confidence for the future has also continued to fall, with confidence in both sales and prices falling to the lowest level since March 2003 and May 2005 respectively.

This fall in confidence has largely been driven by the demand side of the market, which has been hindered by higher interest rates and financial market turmoil.

For the tenth consecutive month new buyer enquiries also fell

Some 51 per cent more surveyors reported a fall in the number of new buyer enquiries than a rise in September, the highest level since March 2003.

The figure is up from 39 per cent in August.

New instructions to sell also declined, with 21 per cent more surveyors reporting a fall rather than a rise.

While this represents the fourth consecutive monthly fall, instructions to sell in London have continued to increase.

Despite these uncertain conditions, the ratio of complete sales in relation to housing stock on the market, increased to 38.4 per cent in September, up from 37.7 per cent in August.

"Although house prices continue to fall, the underlying economy remains strong. A major correction in the market seems unlikely while economic growth is above trend and employment conditions remain buoyant," commented Rics spokesman, Jeremy Leaf.

"The combination of rising interest rates, the introduction of Hips and volatility in the financial markets resulting in tightening of lending criteria, has certainly affected the confidence of buyers and sellers.

"As a result, some would-be buyers are turning to the rental market whereas others, conscious that the next move in interest rates is now likely to be down rather than up and market meltdown is highly improbable, are seizing the opportunity to negotiate with more flexible vendors in a less competitive market-place."

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