Property slump 'is worst for two years'

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The Royal Institution of Chartered Surveyors said a net balance of 22.2 per cent more of its members are reporting price falls rather than increases. This is the greatest negative ratio since July 2005.

Experts said the long-predicted property market slowdown is finally under way.

The news from the estate agents is particularly worrying because it gives the first indication from the high street that prices are falling.

The RICS report, published today, follows a Government study showing that house prices fell in five out of 12 areas of the UK in September.

The East of England, the West Midlands, the North West, Scotland and Northern Ireland all experienced falls, according to figures from the Department for Communities and Local Government.

David Stubbs, RICS senior economist, said: "The slowdown in the UK housing market can clearly be seen.

"With interest rates at 5.75 per cent and the impact of the credit crunch reducing mortgage lending options from many would-be buyers, the slowdown in both activity and price growth is unsurprising."

Banks and building societies have axed highrisk loans, where buyers can borrow 100 per cent of a property's price, and many mortgages which allow people to borrow six or seven times their salary.

Howard Archer, the chief UK and European economist at Global Insight, said: "The Government data add to the overall impression that housing market activity and prices are now losing significant momentum in the face of slowing activity, increased affordability pressures and tightening lending practices.

"We expect these factors to bite increasingly over the coming months, leading to further marked cooling in the housing sector."