House sales set for 10% increase

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The Royal Institution of Chartered Surveyors (RICS) said it expected the average cost of a home to drop by at least 25% from its peak in 2007 to the trough.

It warned that the on-going caution among mortgage lenders and the worsening economic climate looked set to lead to further double digit house price falls during the coming 12 months.

But it added that recent RICS housing market surveys suggested activity levels may have reached the bottom and there could be a 10% increase in sales next year.

The number of enquires received from new buyers recently rose to its highest level since 2006.

However, RICS said the key to turning these enquiries into actual sales would be the availability of mortgages.

Mortgage approvals are currently running at only around 30,000 a month, well down on the 129,000 seen during one month at the height of the lending boom.

The group urged the Government to implement the proposals put forward by former head of Halifax Bank of Scotland Sir James Crosby, namely temporary Government support for the mortgage backed securities market, to try to increase the flow of mortgage lending.

RICS chief economist Simon Rubinsohn said: "Lenders are likely to remain cautious in the near term in the absence of any guarantees on mortgage backed securities.

"This, coupled with an increasingly gloomy economic picture, suggests that house prices will continue to decline in 2009. However, transaction levels do seem to have hit a floor with some signs that opportunistic investors are returning to the market."