Economy 'dampening house prices'

There are doubts stability in the housing market will last

The sluggish UK economy is likely to mean that house prices will not see any "meaningful" recovery for some time, two separate surveys suggest.

There will be no "sustained" upturn until mortgages become more available, the Royal Institution of Chartered Surveyors (RICS) says.

Meanwhile, PricewaterhouseCoopers has warned further price falls are likely in 2009 and 2010.

The government's own house price survey reported property values fell in May.

'More falls'

Surveyors did suggest that there was some optimism among surveyors that prices would go up in the short term.

KEY POINTS More surveyors expect house prices to rise than fall One accountancy firm says house prices could be lower, in real terms, in 2020 than in 2008 An influential committee believes a scheme to kick-start mortgage lending is not working A survey shows the value of some types of homes are rising while others are falling

Latest house price surveys suggest some stabilisation in the market, with the Nationwide suggesting that UK house prices have risen in three of the past four months, leaving them nearly 6% higher than they were in February.

But PwC's economic outlook said that with mortgage levels subdued and UK unemployment looking likely to continue rising for some time, "average UK house prices are likely to fall further between 2009 and 2010".

"Despite some recent reports of rises, we are not out of the woods yet and buyers should take a long-term rather than a short-term view," it said.

And it warned that by 2020, even if there had been five years of strong growth, house prices could be lower, in real terms, than 2008 levels.

'Uncertain conditions'

The RICS monthly survey for June suggested that there was some short-term optimism - with more surveyors expecting property prices to rise than fall for the first time since May 2007.

Some 6% more chartered surveyors expected price increases than price falls - compared with 11% more expecting falls during May's survey.

Low housing availability and increasing interest from would-be buyers had driven this optimism, it said.

However, it added that although there were signs of improvement, it was "unlikely that there will be a sustained upturn while mortgage lenders remain risk adverse".

"A lack of stock on the market is providing a platform for modest price increases," said RICS spokesman Jeremy Leaf.

"While supply remains tight, the market may continue to show tentative signs of firming, but instructions are starting to increase in some regions and this could dampen any meaningful recovery as long as economic conditions remain quite so uncertain."

The reports came as the Communities and Local Government (CLG) Select Committee said that a government scheme to kick-start the UK mortgage market was not working.

The £50bn asset-backed guarantee scheme (ABS) was "doomed to fail", MPs said.

Prices dip

The monthly survey by the Department of Communities and Local Government (DCLG) showed that property values were continuing to fall, but at a slower rate than previously.

Average prices in the UK in May were 12.5% lower than in the same month a year earlier, with the average home costing £188,991.

Between April and May, prices dropped by 0.1%, primarily as a result of falling values for detached and semi-detached houses. This was partly offset by an increase in the average price of bungalows, terraced houses and flats.

In the last year, prices have fallen the most in Northern Ireland (23.2%), with smaller falls seen in England (12.8%), Wales (8.8%) and Scotland (6.9%), the survey found.

In the English regions, average prices were highest in London at £287,142 and lowest in the North East at £129,052.

The average price paid by first-time buyers for a home in the UK was £137,013 in May, with the typical price paid by former owner-occupiers at £220.998.