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Economy: house price fall indicates consumer gloom

House prices in England and Wales suffered their most widespread falls since May 2009 last month.

A survey from the Royal Institution of Chartered Surveyors shows today that the headline house price index dropped to -32 from -8, the sharpest one-month fall since June 2004, and newly-agreed sales suffered their biggest fall in two years.

Transaction levels and prices act as an indicator for consumer spending.

Mortgage lender Nationwide reported the sharpest drop in house prices since February last month, though the rival Halifax survey showed a rise.

Overall, surveys point to an end to the strong price gains seen since the bottom of a 20% slump in early 2009, with many economists forecasting falls for 2010 as a whole.

There were mixed messages on the future path for house prices from Tuesday's survey.

"Prices in many parts of the country may be slipping but this does appear to be encouraging hopes amongst surveyors that sales levels could begin to pick up as a result," said RICS spokesman Jeremy Leaf.

The prospect of job losses in the public sector next year, when government spending cuts start to take effect, is also hurting prices.

The Council of Mortgage Lenders (CML) found in its July report that first-time buyers remained reluctant to step back into the market after banks and building societies tightened their lending criteria.

The CML and RICS surveys follow a series of predictions from housebuilders and lenders that prices will deteriorate sharply in the next 12 months.

 

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