House prices see fastest drop since October

A woman holds an umbrella as she walks past the window of an estate agents office in Manchester, June 7, 2011.

LONDON (Reuters) - House prices fell last month at their fastest pace since October as demand failed to pick up and the number of properties being put up for sale dropped off, a survey showed on Tuesday.

The Royal Institute of Chartered Surveyors' (RICS) seasonally adjusted house price balance fell to -22 from a downwardly revised -17. That was far below economists' forecasts for it to hold steady at May's original reading of -16.

London was the only region to see an increase in prices, RICS said, but even there the pace has weakened considerably since the start of the year.

"The housing market didn't manage to turn a corner last month and activity remained in the doldrums," said Simon Rubinsohn, chief economist at RICS.

"Fewer vendors looked to test the market and levels of buyer interest seem to have fallen back since the expiry of the stamp duty deadline earlier in the year."

An exemption for first-time buyers from stamp duty, a transaction tax on homes worth less than 250,000 pounds, had buoyed markets at the start of the year but the immunity expired in March.

The number of both new buyer enquiries and new vendor instructions declined last month, recording their lowest net balances in over 18 months, the survey found.

Consumers are facing a tough time - government austerity measures are biting, wage growth is below inflation and the cost of credit from banks is relatively high - spurring the Bank of England to say last week it was injecting further stimulus into the economy.

Britain slipped back into recession at the start of the year and with a raft of gloomy data producing little optimism, the 12-month outlook deteriorated, RICS said, with price expectations falling further into negative territory and sales expectations broadly flat after rising the previous month.

The outlook for the next three months remained broadly unchanged.

(Reporting by Jonathan Cable; Editing by John Stonestreet)