House price drop in September

The latest house price survey from the Royal Institution of Chartered Surveyors (RICS) shows house prices falling at their fastest rate for two years.

In September, more RICS members reported a fall in house prices in their local area than an increase. In addition, enquiries from new buyers decreased for the tenth month in a row.

The Institution attributes the decline in prices to a combination of factors, including higher interest rates, tighter lending criteria and the introduction of Home Information Packs for three-bedroom properties.

The report also refers to the recent volatility in the financial markets and its impact on consumer confidence.

However, RICS spokesman Jeremy Leaf reported that “A major correction in the market seems unlikely while economic growth is above trend and employment conditions remain buoyant”.

Commentators generally agree that the Bank of England’s five base rate rises since August 2006 are now having their effect on the housing market.

This was slow to materialise because of the large numbers of homebuyers with fixed rate mortgages.

Earlier this month the Council of Mortgage Lenders (CML) reported that, for first-time buyers, the proportion of income spent on mortgage interest is at its highest level for 16 years.

In the case of people moving house, it is at its highest for 15 years and the CML expects the situation to worsen in the coming months.

Discuss this in the Finance Markets forums

Story link: House price drop in September