Mortgage approvals are still declining, RICS (Royal Institute of Chartered Surveyors) has revealed. Slipping towards 100,000 in March; and this could worsen, as April brought negative figures for new enquiries, an indicator that the market has yet to hit rock bottom.

RICS believes that house prices are set to fall by at least five per cent, but the worst shocks will be felt by the number of transactions.

However, in its House Price Index, Rightmove detected a rise in the average house asking price for May, up 1.2 per cent compared to April, and 2.2 per cent higher than this time last year. The average asking price for May was £242,500, more than £3,000 higher than the previous month.

RICS also offered some hope for house sellers, reassuring them that “A lack of transactional activity need not result in a material drop in house prices as long as homeowners feel under no pressure to sell.”

It added that the “Distressed sales” where the seller lowers the property price drastically in order to make a sale, “which so characterised the property market in the early 1990’s are still largely absent.”

RICS does predict, however, that aspects of the wider economy will suffer if the collapse in sales activity is a prolonged one. Consumer spending, for example, could fall by five per cent in 2008 it said.

Miles Shipside, commercial director of Rightmove comments: “New sellers can see the

storm clouds overhead but seem to believe it’s only raining on other people. The reality is it started raining last September, and has reached storm force in the last month.

“The freeflowing mortgage tap has been turned off. Sellers who are hanging out to achieve last year’s prices need to accept that the market has fallen and that they will end up being punished by a lower price in the long run.”

America is facing a significantly worse property crash than the UK is set to experience. In the Office of Housing and Enterprise Oversight, due for release this week, RICS expects to see a drop in prices of at lease one per cent in March, four per cent lower than the same time in 2007.

© Fair Investment Company Ltd