House prices growth turned negative for the first time since October 2005. 1.8 percent more Chartered Surveyors reported a fall than rise in house prices, down from 10.8 reporting a rise in July. Demand continued to weaken as rising interest rates weighed on buyer affordability. The trend was most prevalent in the West Midlands, the North West and East Anglia. However, London is yet to be affected by credit market turmoil and remains the region with the strongest price growth in England.
New Buyer enquiries declined for the ninth consecutive month and at the fastest pace since August 2004 with potential buyers remaining cautious as the effect of interest rate rises filters through. 37% more Chartered Surveyors reported a fall than a rise in new buyer enquiries compared to 27% in July. New buyer enquiries fell across most regions as demand faltered.
New instructions to sell property fell for the third month in succession. Confidence in household finances remains strong and vendors remain under little pressure to sell. The stock of unsold property on surveyor's books declined with levels down ten percent on year ago levels. Significantly the number of 4 bedroom houses on the market have declined by 51% on year ago levels, possibly pushed by the August HIPS deadline. However, the ratio of completed sales compared to the stock of unsold property increased. Market conditions have been loosening since April, but are now slightly tighter.
Weakening demand, caused by the interest rate cycle, has severely dented surveyor confidence in the outlook for house prices.
RICS spokesman, Ian Perry, said: "Potential house buyers have become far more cautious as they wait and see what affect interest rate rises will have on household finances. Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step to far. The market will soften further, going into the autumn, reducing some impetus from those that have been chasing a rapidly moving target. HIPS have reduced the number of four bedroom family properties coming onto the market, making family homes even more difficult to purchase."