Surveyors see house prices falling

HOUSE prices will tumble in the wake of the terrorist attacks in the US, a report has warned. The bleak prediction from the highly respected Royal Institution of Chartered Surveyors is the first sign that the atrocities have hit the housing market as well as the wider economy.

Price rises have ground to a halt as the confidence of potential buyers has been sapped. The RICS said the war on terror has also compounded fears, which had already dented the housing market, that a global economic slowdown would lead to greater unemployment.

Many of the 326 surveyors questioned by the RICS now believe prices will fall. They argue that homeowners will be forced to cut prices to attract people who are delaying buying amid concerns for the economy's future.

The warning will reignite concerns of a return to the boom and bust cycle of the 1980s housing crisis when millions of people borrowed too much. Many were caught in negative equity - sitting in properties that were worth less than the outstanding mortgage.

RICS spokesman Ian Perry said: 'In the coming months much will depend on the international situation and the global economy. We originally forecast a downturn for the housing market in the autumn because of the expected slowdown in the economy. The fear of unemployment is growing and this has had an impact. Since 11 September the market has been affected as buyers become more uncertain about the impact of the attacks. Anecdotal evidence shows that house prices have stagnated and prices are going to fall. Some people are adjusting their sale price down.'

The RICS monitoring system examines the proportion of estate agents reporting price rises in their own businesses. It showed that the property market in September slowed dramatically as price increases rose at their slowest rate since April. Only 38% more surveyors reported seeing price increases in the three months to the end of September than those who reported price falls. This compared with 49% in the previous month.

The terrorist attacks have affected the property market across the country at all levels. The RICS survey showed a sharp fall in inquiries from potential buyers in the days following 11 September.

Almost 60% more chartered surveyors are predicting sales will fall in the coming months than those who think they will rise, compared to just 4% in August.

House price rises in the South-East, South-West, East Anglia, London and the North showed signs of slowing in the three months to the end of September the RICS said. And house prices will not start to increase again until summer next year, rather than this spring as originally predicted. It added that any terrorist reprisals following the military action in Afghanistan would prolong a recovery.

Mortgage lenders expect house price rises to slow in the next year as economic uncertainty spreads. But they believe it is too early to predict the impact of the terror attacks on consumer confidence and the housing market.

A survey from the Consumers' Association warned that consumer confidence has fallen sharply since July. This is matched by declining optimism over investment and property values, and increasing concerns about job prospects. The number of consumers saving for precautionary reasons has also increased, it said.

The reports will worry economists who believe consumer confidence and the housing market has kept the economy from slipping into full-blown recession.