The slump in the UK property market continued in August, with some estate agents selling fewer than one home per week in the past three months.

The Royal Institution of Chartered Surveyors (Rics) said sales were at their lowest level since its monthly survey started in 1978.

It said the fall in prices slowed, for the fourth month in a row, but they were still much lower than a year ago.

Rics said the continued shortage of mortgage funds was “stifling” buyers.

Mortgage famine

“A lack of mortgage liquidity is the key issue which is keeping the housing market from showing any real sign of recovery,” said Rics spokesperson Jeremy Leaf.

“While money is scarce, many will continue to be denied the next step on the property ladder.

“The Government’s stamp duty policy will not be enough kick start transactions,” he warned.

Meanwhile, the head of the Nationwide Building Society told the BBC that he expected house prices to fall by 25% from their peak last autumn.

Graham Beale also said he does not expect to see signs of recovery in the housing market until 2010.

The weakness in the housing market is being exacerbated by the sharp slowdown in the UK economy.

Unemployment is rising, growth is falling, and retail sales are weak – with the British Retail Consortium reporting that sales have been flat throughout the summer.

The past 12 months have seen an unprecedented collapse in home sales and prices since the property market, both here and in the US, was struck by the credit crunch in the financial markets.

Ripples from the crisis have spread throughout the world, with house prices falling sharply in many other European countries.

According to Rics, the average estate agent in the UK sold just 12.7 properties in the three months to the end of August.

That meant sales were running at levels 47% lower than in August last year.

And with the market normally quiet in August anyway, estate agents have seen interest even from predatory buyers “stagnate”.

The only glimmer of optimism in the Rics report was that the number of estate agents reporting a rise in new instructions was only slightly outnumbered by those reporting a fall.

However the number of new enquiries from potential new buyers fell again, and at a faster pace than in July, suggesting that the market may stagnate further in coming months.

“Falls in enquiries took place across all regions in England and Wales,” Rics said.

Cheaper mortgages?

The cost of borrowing has in fact been coming down in the past couple of months for some new borrowers, especially those who can afford to put down a deposit of at least 25%.

Banks and other lenders have found it cheaper than before to raise mortgage funds on the wholesale financial markets and have been passing this on to their most favoured customers.

Of the 12 largest mortgage lenders in the UK, 10 have cut the cost of their two or three-year fixed rate deals in the past two weeks.

The latest example came from HSBC, which yesterday cut the cost of all its fixed rate mortgages by between 0.46% and 0.72%.

News reported by The BBC

Ministers are “very unlikely” to achieve housing targets, the UK’s chief advisor on home building has warned.

Professor Stephen Nickell said that, unless conditions change, the target of three million new homes in England by 2020 will not be met.

To get to this target, the housing industry needs to be building 240,000 homes a year, a figure that few think they will achieve this year.

The industry is already behind in its construction targets.

Just over 200,000 new homes were built last year.

Priced out

Homebuilders have cut back new building this year as a lack of mortgage products and falling house prices have cut demand.

Mr Nickell, who heads the National Housing and Planning Advice Unit, believes that alongside the financial constraints local authorities are also holding up new house building.

“The wealthier people in society can satisfy their housing demands, more or less, as they get richer” Professor Stephen Nickell

“Unless local authorities are given a strong incentive to allow house building in their locality, it seems to me very unlikely that we will hit the housing targets,” he said.

“And if you don’t keep building these houses the prices just keep going up relative to people’s incomes.”

Government figures published recently showed that new housing work was down 5% in the first quarter of this year compared with the same period in 2007.

The Home Builders Federation, which represents major house builders, said that new building work did not show any signs of picking up.

“Right now the credit crunch is stopping people from getting the finance that people need to buy homes,” said John Slaughter, director of external affairs at the Federation.

“Longer term we need a better business environment and less regulatory cost to get the industry moving.”

The big building companies are beginning to show the strain with rumours that they may have to raise new capital to survive.

The two giants of the industry, Taylor Wimpey and Barratt Developments, carry a total of more than £2.5 billion of debt.

That equates to more than double their combined market worth.

The financial pain being felt by the companies has already forced one of them, Persimmon, to put a halt on all new building projects.

Falling prices

Figures from the Nationwide this month showed a 2.5% drop in house prices in May, with some predicting a 20% drop by the end of 2008.

But despite falling house prices, Professor Nickell said the current situation seemed to be only benefiting the richer parts of society.

“The wealthier people in society can satisfy their housing demands, more or less, as they get richer. While the rest of us get squashed into smaller and smaller houses.” he said.

And he added that if present trends continue, things are looking bleak for the future of housing in England.

“If the present situation continues we will be less well housed than the majority of people in Europe, Australia or the United States,” he said.

News reported by BBC