House price gloom 'recalls 1990s'

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Property prices are falling to an extent not seen since the 1990s housing recession, a surveyors' body warns. The Royal Institution of Chartered Surveyors (Rics) said 49.1% more surveyors saw price falls in December than reported a rise. This was the gloomiest figure since November 1992. Prices have been hit by last year's interest rate rises and tighter lending criteria, Rics said. Other surveys have also indicated the market is slowing. Recent data from the Department of Communities and Local Government revealed that prices fell by 0.8% in November, compared with a slight rise of 0.1% in October. The latest research from the Halifax bank and the Nationwide building society suggested the market weakened further in December. Mortgage approval levels also fell to a three-year low in November. Weak demand December marked the fifth consecutive month of falling prices, according to the Rics survey.  Demand for property remains weak, with 25% more surveyors reporting a fall in the number of people looking to buy a new house than recording an increase, it said. The survey also showed that surveyor confidence about the outlook for sales and prices had deteriorated, with both measures at their lowest level since the questions were first included in the survey in 1998. "The housing market is clearly feeling the pinch from the credit crunch and the round of interest rate hikes in 2007," said Rics spokesman Ian Perry. However, he said that while sentiment had fallen sharply to a "low ebb", the underlying economic conditions are "vastly different" to those in place during the 1990s housing recession. "Supply would have to loosen considerably before prices experience a significant dip," he added. The survey showed that new instructions to sell property actually rose for the first time in six months. But at the same time the stock of unsold property held by surveyors increased by 7.1% following a 9.1% jump in November and a 10.3% gain in October. Stability Rics said the next few months would be crucial to the health of the market as potential buyers wait to see if the Bank of England will reduce rates again. The Bank of England's Monetary Policy Committee (MPC) voted unanimously to cut interest rates from 5.75% to 5.5% at its December meeting. The MPC decided to hold rates at its January meeting, but many economists expect it to cut again very soon, possibly as early as February. Rics believes further cuts may be necessary to ensure the market remains in a "stable" condition.

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