Interest rate cut lifts housing market gloom

The worst may be over for the British housing market, according to the latest report from the Royal Institution of Chartered Surveyors, although house sales are still down from from this time last year in most parts of the country.

Completed sales for July were 18% lower than in 2004, but RICS emphasised that it is the best result in five months and a significant rebound from the -36% seen in February. House prices even increased in Scotland and the north-west for the first time in a year.

"Some signs of recovery are evident in the market," said Jeremy Leaf of RICS. "Would-be buyers have become more confident as a result of the interest rate outlook, while the economy continues to deliver steady growth."

Mr Leaf was quick to add that although the house market appears to have flattened out, there is little chance of another housing market boom in the near future - and certainly not at the levels enjoyed over the past decade.

At the moment buyers have the upper hand as there is a glut of unsold properties on the market, which provides ample choice and a lot of room for price negotiation. House prices remained weak across the country with 36% of chartered surveyors reporting falls in July, although that number is down slightly from 42% reporting decreases in June.

The outlook for London is more promising after a sluggish first half of the year. House prices fell at the slowest pace since March and sales appear to have stabilised. The terror events of July 7 and 21 have not spilled over to the housing market, at least in the July figures. "The recent terror attacks have not had any impact on house prices, even in London," Mr Leaf said. Surveyors remain optimistic that London house prices will rise in the autumn and may even grow again by the year's end.

"The risk of a near-term housing market crash seems to have eased," said Howard Archer of Global Insight. "The most likely scenario seems to be that house prices will remain relatively soft for an extended period."

New buyer inquiries increased in June and July and RICS hopes the Bank of England's recent interest rate cut to 4.50% will generate even more buyer interest during the coming months.