Sept house prices fall at fastest rate in 2 years

By Fiona Shaikh

LONDON (Reuters) - House prices fell at their fastest pace in two years in the three months to September and the outlook for sales was its weakest in 4-1/2 years, as interest rate worries put people off investing in property.

The Royal Institution of Chartered Surveyors' house price balance for September fell to -14.6 from a downwardly revised -3.3 in August to reach its lowest since September 2005, RICS said on Thursday.

Enquiries from potential buyers fell for the 10th month in a row and at the fastest rate since March 2003 and surveyors' confidence about the sales outlook was also the lowest since then. The outlook for prices was the most depressed since May 2005.

RICS said the prospect of tighter borrowing criteria as a result of recent turbulence on financial markets was mainly to blame for the slide in demand, which, along with five Bank of England rate hikes made it even more costly for people to buy.

The introduction of Home Information Packs -- new regulations on people selling houses -- was also having a dampening effect, although a house price crash could be averted as the economy was in robust shape.

"A major correction in the market seems unlikely while economic growth is above trend and employment conditions remain buoyant," said RICS spokesman Jeremy Leaf.

"The combination of rising interest rates, the introduction of HIPs and volatility in the financial markets resulting in tightening of lending criteria, has certainly affected the confidence of buyers and sellers."

Still, the survey showed housing supply remained tight and the sales to stock ratio, regarded by some economists as a more reliable indicator of housing market conditions, increased to 38.4 percent from 37.7 percent in August, above its long-run average.