House prices are falling at the fastest rate for 30 years - and there's worse to come, say agents

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House prices are experiencing their most widespread decline since records began 30 years ago, a report from industry experts reveals today.

The study painted a picture of lower prices, few buyers and desperate sellers - with worse to come.

It comes as new figures show arrangement fees for mortgages have doubled in the last 12 months, adding to the woes for potential homeowners already struggling under the effects of the credit crunch.

Application fees on the five most competitive three-year fixes have risen 96 per cent to £1,132 pounds from £578 pounds a year ago, according to online mortgage company mform.co.uk.

Typical arrangement fees on best-buy two-year fixes have increased 48 percent to £1,478 pounds from 999 pounds over the same period.

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Pessimistic: Estate agents do not expect house prices to stop falling in the next quarter, the Royal Institution of Chartered Surveyors says. They claim worse is to come

A study by the Royal Institution of Chartered Surveyors painted a picture of lower prices, few buyers and desperate sellers and predicted there was worse still to come.

Estate agents and surveyors polled by the group for its monthly report were so pessimistic that it is the bleakest since they first started up in 1978.

Government figures released today showing house prices fell by 1.6 per cent in February added to the gloom.

They revealed annual house price growth is still plummeting, down to 6.7 per cent for the year to the end of Febuary, down from eight per cent in January.

RICS say house prices are falling in every region of England and Wales, with the majority falling at their fastest pace since the record started.

The North, Yorkshire and Humberside, East Midlands, West Midlands, East Anglia, the South East, the South West and Wales are all on the black list.

But the East Midlands is experiencing the worst problems. Prices have been falling for the last 15 months.

The speed of the decline is picking up, with prices falling at the 'fastest pace in the survey's history' last month.

The survey found that 78.5 per cent more surveyors reported a fall than a rise in house prices - the highest proportion since records began.

The figure eclipses the last property crash of the early 1990s.

To make matters worse, agents expect prices to keep on falling in the next quarter, according to the influential report.

Today's study exposes problems in every area of the market.

The number of homes sold between January and March was 22.4 per estate agent - close to the all-time low of 18.3, in 1992.

Increasing numbers of homes are put up for sale, but few buyers are coming forward.

Over the last year, the number of unsold properties in estate agents' windows has climbed 50 per cent. Meanwhile, inquiries from buyers have fallen for 16 consecutive months.

The surveyors and estate agents who took part in the survey were extraordinarily pessimistic.

One predicted prices will fall 30 per cent over the next three years. Another warned the situation is going to worsen, as the mortgage meltdown has only just started to take effect.

'With the effects of tighter lending criteria still to be felt, we may not have reached the bottom.'

Another declared: 'It is tough, very tough. Buyers are looking for rock bottom bargains. The market is yet to get worse before it gets better.'

And one said: 'If we compare sales figures this March to 2007, 2006, 2005 etc then we can only describe the market as dire.'

The Department of Communities and Local Government's figures showed February's fall in prices had been driven by a 2.9 per cent drop in the cost of flats.

Meanwhile, detached and semi-detached homes lost 1.5 per cent of their value, the cost of terraced properties fell by 1.1 per cent and the price of bungalows was 0.6 per cent lower.

The average cost of a home in the UK stood at £217,737 at the end of February, its lowest level since June last year and down from £221,278 in January, which has itself been revised down.

The annual rate of house price growth fell in 10 of the UK's 12 economic regions, with only the North West and West Midlands seeing a rise.

There are also no areas where growth remains in double digits, with Scotland seeing the strongest gains of 9.7 per cent during the past year, followed by London at 9.5 per cent.

The Council of Morgage Lenders (CML) will next week press ministers to improve state support for struggling mortgage holders amid fears repossessions are set to escalate rapidly.

Monday's meeting with work and pensions minister Stephen Timms, will come ahead of talks between the CML and Chancellor Alistair Darling on the credit crunch.

The CML believes state support for mortgage holders who run into difficulties is insufficient and is suggesting the Government remove a £100,000 ceiling mortgage qualifying for help.

It is predicting 45,000 repossessions in 2008.

"We've obviously highlighted the safety net for borrowers in difficulties is not good enough," CML director general Michael Coogan said today.

"A very simple approach the Government could take is to reverse the policies of the previous administration in 1995 and that would provide support for customers in the short-term."

On the meeting with the Chancellor, Mr Coogan said the Government and mortgage lenders "have to work together".

He also stressed that UK assets were "by and large very good".

"We do not have the same market as the US and the key challenge for the Chancellor and ourselves is to continue to reinforce the differences between the two markets," he said.

Last week Halifax, the biggest mortgage lender, said prices slumped 2.5 per cent in March, the largest drop in a month since the property crash of 1992.

Yesterday Jeremy Leaf, of the RICS, insisted that 'a significant crash' remains unlikely, unless the number of homes coming on to the market rises 'dramatically'.

But Shadow Chancellor George Osborne said homeowners should prepare themselves for a 'bust'. 'We are in the bust bit after the boom bit, if you take the figures from the Halifax,' he said.

 

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