'10% chance' of house price crash

Rics has lowered its expectations for house prices over the next 12 to 15 months to no change from 3% growth.

Its chief economist Simon Rubinsohn said that talk of a looming crash was legitimate and not irresponsible.

In the last housing market crash, average prices fell by 35%, adjusted for inflation, from their peak in 1989.

Mr Rubinsohn also said that there was a 20% chance of a 10% fall in London house prices over the next 12 months.

However, Peter Damesick, head of UK property research at CB Richard Ellis, said the chances of a housing market crash were still "pretty small" because there was no obvious trigger such as the economic downturn or sharp interest rate rises seen in the early 1990s.

Signs of slowdown

The Bank of England has raised UK interest rates five times since August 2006 in an attempt to cool inflation, and this has made mortgage payments for some people more expensive.

Last month, three of the most-followed calculators of house prices - the Halifax, Nationwide and the Land Registry - all said there were signs that demand in the housing market had slowed.

Many analysts believe the recent run of interest rates rises from the Bank of England has now finished, especially given the latest fall in UK inflation. The Consumer Prices Index fell to 1.8% in August, down from 1.9% in July.

On Monday, the former head of the US central bank. Alan Greenspan, said that the UK housing market was particularly vulnerable to current market problems because of the large proportion of variable-rate mortgage holders.

RELATED INTERNET LINKS
Royal Institution of Chartered Surveyors
The BBC is not responsible for the content of external internet sites