House prices 'beginning to fall'

House price growth turned negative in August as demand slowed down, according to the Royal Institution of Chartered Surveyors (Rics).

The group's latest survey shows that 1.8 per cent more chartered surveyors reported a fall rather than a rise in house prices.

This is a significant decrease from the 10.8 per cent margin that reported a rise in July and the first time since October 2005 that price growth has been negative.

Weakening demand was cited as the major factor in the negative growth, with higher interest rates meaning that fewer people signed up to self-cert mortgages and other home loans.

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."

Weak demand for self-cert mortgages and other home loan products made the trend for negative price growth most prevalent in the West Midlands, north-west and East Anglia.

London, however, continued to show resistance to credit market turmoil and experienced further price growth in August.

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