House prices falling

London is the only region where more surveyors reported price rises than falls Photo: Rui Vieira/PA Wire

House prices are falling and more drops are expected in the coming months, according to surveyors.

A balance of 24% more surveyors reported falling rather than rising prices last month, the most negative reading since June 2011, the Royal Institution of Chartered Surveyors (RICS) said.

London, which has had strong interest from overseas buyers, is the only region where more surveyors reported price rises than falls.

The start of the school holidays meant activity in the market tailed off further, with the number of new sellers coming to market declining for the third month in a row, while demand from buyers remained broadly flat despite the wet weather, the study said.

RICS said it had found marked regional differences however, with the North and North West regions seeing demand from buyers generally rising over the last four months in a row, while demand has either been unchanged or dropped off elsewhere.

Some 15.1 sales per surveyor were recorded over a three month period, the lowest figure seen since October last year.

RICS said that the the difficulties many buyers are having in getting a mortgage has contributed to the drop in transactions.

Sales are expected to pick up slightly in the next few months, but both prices and sales figures are likely to show a deterioration in the next year, the study found.

Peter Bolton King, RICS global residential director, said: "Despite the terrible weather seen in many parts of the county last month, a steady number of potential buyers still got out there to test the market.

"However, this didn't result in a higher level of actual transactions. Fewer sellers are putting their homes up for sale and the ongoing problem of accessing affordable finance is not helping.

"If vendors want to sell their homes quickly, they will have to be realistic in their price expectations."

Lenders have been tightening their borrowing criteria in recent months amid the weak economy and Bank of England figures recently showed that mortgage approvals dropped to an 18-month low in June.

Competition has recently increased among lenders who have cut rates to attract buyers with larger amounts of equity, but borrowers with smaller deposits are expected to have a particularly tough time finding a deal in the coming months.

The figures refer to England and Wales only.

Scotland and Northern Ireland continued to see a general deterioration in house values in July, the report said.

Data for Scotland and Northern Ireland is collected but does not feed into the national data.