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Last Updated: Thursday, 13 September 2007, 12:59 GMT 13:59 UK
Housing market still slowing down
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New buyers are being driven away by high prices, says Rics
The UK housing market is continuing to slow down under the effect of higher interest rates, the Royal Institution of Chartered Surveyors says.

Its latest survey reveals that in August slightly more surveyors saw prices fall locally than saw them rise.

Rics says this was the first time this had happened since October 2005.

This contradicts the evidence of all other house price surveys, but Rics said enquiries from new buyers had also fallen for the ninth month in a row.

"Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step too far," said Ian Perry of Rics.

"The market will soften further, going into the autumn, reducing some impetus from those that have been chasing a rapidly-moving target," he added.


Surveys from organisations such as the big mortgage lenders, the Department of Communities and Local Government, and the English and Welsh Land Registry, have all reported house prices continuing to go up at a brisk rate.

The persistence of double-digit house price inflation this year, despite the five increases in interest rates imposed by the Bank of England since the summer of 2006, has surprised most market observers.

For instance, earlier this week, the DCLG reported that average house prices in July were rising faster than before at 12.4% a year - the fastest rate since March 2005.

Two of the UK's largest mortgage lenders the Halifax and Nationwide both reported a small rise in house prices in August.

One explanation for what is going on is that there is a divergence between London and the South East - where prices have been stoked up by huge City bonuses and a shortage of new houses - and the rest of the country, where prices are rising more slowly.

That is why the Rics survey may be a good indicator of an impending downturn.

Survey methods

The Rics survey does not measure actual house prices.

It simply asks a sample of its members around the country if prices locally are higher or lower than in the previous month.

The balance between the two is what gets reported.

Thus surveyors in some parts of the country are detecting a slowdown, even if average prices across the UK have yet to fall.

The methodology may seem crude and subjective.

However, Rics has traditionally had its finger on the pulse of the market when it has changed direction - as during the property slump of the early 1990s, when many other commentators refused to acknowledge that prices were falling.

Rics also says that the market was affected in August by the advent of compulsory Home Information Packs for the sale of houses with four bedrooms or more.

It says 51% fewer of these were sold during August than in the same month a year ago.

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