Property sales rise in October

The property business has gone from boom to bust in less than a year

Property sales rose by 8% in October, according to the latest figures from HM Revenue & Customs (HMRC).

At 65,000, sales were 5,000 higher than in September, the first monthly increase since May.

However, they were still 50% down on a year ago, with banks and building societies reluctant to lend because of the credit crunch.

Some experts are worried that sales may start falling again because the economy is heading for recession.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics) said the figures were evidence that the dramatic slump in sales over the past year had stabilised recently.

"This improvement is broadly consistent with CML mortgage lending data and the Rics new buyer enquiries," he said.

"Falling house prices and lower interest rates are encouraging some buyers back into the market but the big risk is the worsening economic climate and the knock-on impact on employment," he added.

Mortgage tap

The recent peak in sales was in December 2006 when 154,000 homes were sold.

But transactions started to collapse in September last year, as lenders turned off the mortgage tap in response to the growing credit crunch, in turn triggering the most rapid fall in UK house prices since the early 1930s.

Banks and building societies found that the market for borrowing money from other financial institutions closed down, and the mortgage market imploded.

This was highlighted by the near-collapse of the Northern Rock bank and the more recent government rescue of the Bradford & Bingley and HBOS.

With the economy now widely believed to be heading for recession there is the obvious possibility that would-be buyers will be deterred further, either by a lack of confidence or by losing their own jobs.

As a result, many commentators believe that prices will continue falling well into next year.