Home sales at lowest for 30 years

There are fewer and fewer buyers on the market

The slump in the UK property market continued in August, with some estate agents selling fewer than one home per week in the past three months.

The Royal Institution of Chartered Surveyors (Rics) said sales were at their lowest level since its monthly survey started in 1978.

It said the fall in prices slowed, for the fourth month in a row, but they were still much lower than a year ago.

Rics said the continued shortage of mortgage funds was "stifling" buyers.

Mortgage famine

"A lack of mortgage liquidity is the key issue which is keeping the housing market from showing any real sign of recovery," said Rics spokesperson Jeremy Leaf.

Robert Peston interviews Graham Beale of Nationwide on house prices

"While money is scarce, many will continue to be denied the next step on the property ladder.

"The Government's stamp duty policy will not be enough kick start transactions," he warned.

Meanwhile, the head of the Nationwide Building Society told the BBC that he expected house prices to fall by 25% from their peak last autumn.

Graham Beale also said he does not expect to see signs of recovery in the housing market until 2010.

See Robert Peston's interview with Graham Beale

Stagnation

The weakness in the housing market is being exacerbated by the sharp slowdown in the UK economy.

Unemployment is rising, growth is falling, and retail sales are weak - with the British Retail Consortium reporting that sales have been flat throughout the summer.

The past 12 months have seen an unprecedented collapse in home sales and prices since the property market, both here and in the US, was struck by the credit crunch in the financial markets.

Ripples from the crisis have spread throughout the world, with house prices falling sharply in many other European countries.

According to Rics, the average estate agent in the UK sold just 12.7 properties in the three months to the end of August.

That meant sales were running at levels 47% lower than in August last year.

And with the market normally quiet in August anyway, estate agents have seen interest even from predatory buyers "stagnate".

The only glimmer of optimism in the Rics report was that the number of estate agents reporting a rise in new instructions was only slightly outnumbered by those reporting a fall.

However the number of new enquiries from potential new buyers fell again, and at a faster pace than in July, suggesting that the market may stagnate further in coming months.

"Falls in enquiries took place across all regions in England and Wales," Rics said.

Cheaper mortgages?

The cost of borrowing has in fact been coming down in the past couple of months for some new borrowers, especially those who can afford to put down a deposit of at least 25%.

Banks and other lenders have found it cheaper than before to raise mortgage funds on the wholesale financial markets and have been passing this on to their most favoured customers.

Of the 12 largest mortgage lenders in the UK, 10 have cut the cost of their two or three-year fixed rate deals in the past two weeks.

The latest example came from HSBC, which yesterday cut the cost of all its fixed rate mortgages by between 0.46% and 0.72%.