First-time buyer numbers drop

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The Royal Institution of Chartered Surveyors (RICS) said inquires from new buyers dropped at the fastest rate since August 2004 last month, while the number of unsold properties on surveyors' books rose to the highest level since the beginning of the year.

The group said with interest rates now 5.75%, and commentators expecting them to rise to 6%, many first-time buyers were continuing to rent while they waited to see what would happen to the property market.

This helped contribute to a fall in completed sales for the three months to the end of June to just 23.5 per surveyor, down from 24.4 for the three months to the end of June.

But despite the slowdown in demand, house prices still rose for the 21st month in a row during July.

Overall, 12.6% more surveyors in the UK reported a rise in house prices, compared with those who saw falls, up from 10.6% in June, but well down on the long-term average of 21.6%.

RICS spokesman Jeremy Leaf said: "The combination of softening demand and supply is causing market conditions to weaken further.

"Buyer activity has pulled back a little over fears that we may have seen the top of the market.

"With interest rates perched at 5.75% and a jump to 6% a strong possibility, aspiring first-time-buyers are continuing to rent until the market trend becomes clearer."

The figures come as the Government reported an unexpected rebound in house price growth during June. The Department for Communities and Local Government said annual house price inflation was running at its highest level for more than two years at 12.1%.