House prices dropping at fastest rate for five years, claim surveyors

House prices are falling at their fastest rate for five years, with values tumbling across southern England, say chartered surveyors.

House prices are falling at their fastest rate for five years, with values tumbling across southern England, say chartered surveyors.

The number reporting a drop in prices last month outweighed those witnessing rises by 8 percentage points, the biggest margin since September 1995. Every region in the South suffered from a fall in prices, with the trend accelerating in the South-east, South-west and East Anglia - three areas that have seen prices rocket over the past two years.

But rises were reported in Wales, Yorkshire and Humberside, the North-west, North-east and the East Midlands.

In the South-east outside London, more than one-third of surveyors, 38 per cent, said prices were falling on balance compared with 32 per cent last month. Prices in the capital also fell but at a slower rate thanin July.

The West Midlands straddled the North-South divide, with 9 per cent of surveyors reporting falling prices.

The Royal Institution of Chartered Surveyors, which ran the survey, said the results were a sign that vendors acknowledged they had to be more "realistic" when pricing their home.

"Although price falls have been greatest in the South-east, it was southern areas of the country that showed the greatest rises when house price inflation was at its height," a spokesman said.

Surveyors expect prices to stabilise over the autumn, which is normally the season when buyers and sellers return to the market after a summer break.

Three-quarters of the 250 who took part said they expected no further move in prices over the next three months. While 17 per cent expected a fall, 10 per cent forecast a recovery in prices.

Milan Khatri, the institution's chief economist, said: "With signs that the economy and labour market remain healthy, confidence in the housing market shows that any downward price moves in the autumn are likely to be small."

Anecdotal evidence from individual surveyors who took part in the survey backed up the underlying optimism. Kevin Ryan, of Egerton London Residential in Marylebone, in the heart of the West End of London, said: "Predictions of a full-scale recession are proving incorrect."

Mark Sargeantson, of Fenn Wright in Ipswich, said: "As supply catches up with demand prices are levelling off, but confidence levels remain encouragingly high."

The survey is the latest in a run of reports to point to a slowdown in the market. Recent figures from Halifax, the biggest lender, showed annual price inflation had fallen from a peak of 16 per cent earlier this year to 7.4 per cent. Nationwide Building Society, which produces its estimates for September on Friday, suggests the annual rate is running at 11.2 per cent compared with a peak of 17.5 per cent.

Analysts believe four increases in interest rates by the Bank of England around the new year, pushing up mortgage rates by about one-sixth, helped to cool the market.

The abolition of the mortgage interest tax relief and an increase in the level of stamp duty on property transactions also put the brakes on rising prices.

John Halman, a surveyor at Gascoigne Halman in Marple Bridge, Cheshire, said: "Increased stamp duty rates are causing problems for property with asking prices between £250,000 and £275,000."