The number of house sales could fall by at least 40% this year, according to the Royal Institute of Chartered Surveyors (RICS).
The dramatic slowing in the market has also caused RICS to lower its forecast for house price growth in 2008.
RICS says it now believes house prices will fall by 5% during 2008. It had previously envisaged prices remaining flat.
RICS remains concerned about the effect a severe slowdown in house sales could have, with consumer spending likely to fall by around 8% during 2008 as less is spent on items such as furniture, carpets and DIY equipment.
However, RICS does not believe repossessions and distressed sales will come to characterise the market, as they did in the early 1990’s, and says unemployment in unlikely to rise considerably.
Homeowners are generally less highly geared than they were in the early 1990’s, according to RICS, with average LTV’s standing at 85% today, compared with 90% in the late 80’s.
RICS also points out that around 71% of first time buyers are on capital and interest repayment mortgages, compared with a mere 17% in 1989.
RICS is now the latest industry organisation to downgrade its forecast for house prices, but its expectations are still considerably more optimistic than the Government’s own forecasts, which last weak revealed it expects price falls of at least 5% to 10%.
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