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An index of British house prices fell to the lowest in more than two years in October, adding to evidence the property market is cooling, says the Royal Institution of Chartered Surveyors.
The number of real estate agents and surveyors saying prices declined outnumbered those reporting increases by 22 percentage points, London-based RICS said yesterday.
That's the lowest reading since July 2005. In London, one of only two regions where values continued to rise, gains were the slowest in a year.
Five interest-rate increases from the Bank of England and a jump in credit costs that sparked a run on a British mortgage lender are curbing demand for homes.
After tripling in the past decade, British house prices may fall next year because of a "toxic mix" of higher lending rates and record consumer debt, says Citigroup economist Michael Saunders.
"The housing market is seeing the awaited slowdown that many had been expecting," said RICS spokesman Ian Perry. "A decline in transactions may be in the offing."
The findings confirm reports by HBOS, the nation's biggest mortgage lender, and research company Hometrack, both of which said property prices were falling. Nationwide Building Society and Rightmove say prices still are rising.
RICS said confidence in future price gains fell to the lowest since April 2003. Nine of the 11 regions in the surveys showed declines, led by East Anglia and the West Midlands.
In London, the seasonally adjusted index dropped to 4 last month from 19 the previous month.
Hometrack, which last month said prices fell for the first time in two years in October, expects the average value of a home to climb 1 per cent next year after a 4.5 per cent gain this year. RICS' gauge of buyers getting in touch with real estate agents to browse properties fell for an 11th month.
"The market is now showing signs of cooling," said Knightsbridge surveyor James Wilson. "Fewer applicants are registering, and properties are taking longer to sell."
Luxury-home prices in London rose last month at the slowest pace since July 2005 as the prospect of job cuts and smaller bonuses deterred investment bankers and other buyers, said estate agent Knight Frank.
A shortage of housing may limit a slowdown. Construction of new homes stagnated at 148,000 units a year on average between 1989 and 2005, down from a peak of 425,000 in 1968, Government figures show.
The economy is set to grow at the fastest pace in three years in 2007, and unemployment is at a two 1/2-year low.
"A material fall in prices would require a weaker labour market prompting forced sales," said Perry.
Consumers in Britain are shouldering a record £1.4 trillion ($3.83 trillion) in debt and trying to cope with interest rates at their highest since 2001.
The US sub-prime mortgage slump has also prompted banks to lift mortgage rates, hurting affordability more.
Mortgages with a fixed-rate for two years, the most popular in the UK, cost an average 6.37 per cent in interest last month compared with 5.41 per cent a year ago, shows Bank of England data.
Signs of decline
* Index of British real estate agents saying prices have fallen is up by 22 points.
* Nine of the 11 regions surveyed show declines.
* Number of UK buyers getting in touch with real estate agents falls for 11th month in a row.
- Bloomberg
