'First house price fall in a year'

HOUSE prices have fallen for the first time in more than a year, according to the latest survey by the Royal Institute of Chartered Surveyors (RICS).

The study, regarded by economists as one of the most reliable early indicators for property market trends, said: 'Prospective buyers have clearly been knocked off balance by the rise in borrowing costs and continued talk of a sharp downturn in prices.'

The UK base rate has risen from a low of 3.5% last November to 4.75%, with back-to-back rises in May and June steeply increasing the cost of borrowing.

The RICS survey showed that in the three months to August, 12% more surveyors reported a fall in house prices than a rise, reversing the reading in July when a net 3% of those polled said prices had increased. It was the first reported fall since June 2003.

The biggest declines were seen in the South-East and eastern regions while 'firm rises' were recorded in Scotland and the North-East.

However, despite lower asking prices, buyers have stayed away with the stock of unsold properties rising on their level in May. Also sales had fallen 11% to their lowest level since November 2000. 'This shows that selling activity has seen little notable pick-up despite speculation over price falls,' the report warned.

Despite the downbeat figures, RICS said dramatic price falls were unlikely. 'The summer is always a quieter period as people are away and tend to take a break from house hunting,' said Ian Perry, RICS national housing spokesman.

'Warnings from the Bank of England have reduced confidence, but houses that reflect their asking price are still attracting plenty of attention.'

'Some speculation in the housing market is quite gloomy at the moment. However, we are confident that a prolonged slide in prices will be avoided, underpinned by the strength of the economy and good employment prospects,' he added.

Bank of England Governor Mervyn King has repeated his warning on house prices several times over the summer. He told a Parliamentary select committee: 'After a year in which house prices have risen very rapidly... the chances of house prices falling are greater than they were.

'Anyone entering or moving within the housing market should consider carefully the possible future paths of both house prices and interest rates.'

His apparently cautious warning sent shock waves through the property market.

Evidence of price falls have since emerged. Lender Halifax said values edged 0.6% lower in August while property website Rightmove said asking prices fell 2% in August and have so far been flat in Sepetmber.

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