Fall in house prices shows market boom is no more

House prices in England have fallen for the first time in more than a year, according to the latest report from the Royal Institute of Chartered Surveyors.

Property prices in August have slumped because of the slowdown in consumer spending and five interest rate rises from the Bank of England.

The evidence from RICS show a market now experiencing falling prices and lesser activity across all parts of the country, as buyer enquiries in August were also down for the fourth month consecutively.

It predicts the demand for housing will continue to weaken in the next few months, as buyers are scared out the market by expensive borrowing and fears of a full-blown crash.

RICS said that a prolonged decline of prices was unlikely - as is the chance of a dramatic housing crash, most recently seen in the 1990s.

They said there has been some "gloomy speculation" about the sudden end to the property boom, but did take note of "a fairly abrupt slowdown since May."

The picture, according to RICS, is supported by the Council of Mortgage Lenders, which reports a 20 per cent drop in the number of loans for house buying, during the eighth month.

This takes loans used for property to 104,000 – notably down from 130,000 in July and 116,000 in August of last year.

The British Banker's Association said there is a slowdown in the amount of borrowing through home loans, with increases of £4.39bn for the month - the lowest amount since June 2002.

"Evidence that the housing market is losing momentum is currently coming in thick and fast," says Howard Archer, analyst at Global Insight.

"Markedly weaker mortgage lending and approvals in August, evident in the data today from the British Bankers Association, Building Societies Association and the Council of Mortgage Lenders, points to a further softening in house prices in the near term at least."

He argues it remains "difficult to be totally confident" that the market slowdown is more than a just "temporary lull" but suggested that the blip in the market was what most analysts suspect.

Across the country, the market has slowed in all regions, with London and the South East falling the most, compared to Scotland that has risen in price growth by the largest margin.

Regions where prices have fallen by up to 0.4 per cent, include, Surrey, Berkshire, and East Sussex as well as more conventional 'hotspots,' such as North and East London.

John Wriglesworth, housing economist at Hometrack, said: "Recent interest rate rises continue to take their toll on the housing market this month as house prices take another tumble, albeit a minor one."

Research from the group shows the average price of a house, taking into account the August slump, is estimated at £152,100, a telling departure from Halifax figures that previously said an average house in England is around £160,000.

"House prices are now very near their peak in terms of affordability and the recent housing boom now appears to be well and truly over."

 

22nd September 2004

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