House price balance falls to lowest since 1978

LONDON (Reuters) - The Royal Institute of Chartered Surveyors house price balance fell in March to its lowest in the 30-year history of the survey, RICS said on Tuesday, sending a strong signal that the housing market is cooling fast.

The net balance of surveyors reporting falling, rather than rising, house prices deteriorated to -78.5 in the three months to March from -65.7 in February -- the lowest since survey began in January 1978 and well below forecasts for a reading of -67.5.

The figures are likely to reinforce expectations the Bank of England will need to continue cutting interest rates this year, after trimming rates by 25 basis points to 5 percent last week.

Britain's biggest mortgage lender Halifax said last week that house prices fell in March at their sharpest pace since the recession of the early 1990s as the credit crunch forces banks to toughen up mortgage terms and begins to hurt consumers.

"Sentiment is at a very low ebb and will continue to remain depressed while the economy suffers from this unique liquidity blight," said Jeremy Leaf, RICS spokesman.

"The slowdown in prices is directly attributable to a lack of available finance which has hit demand. However, until new supply increases dramatically a significant crash remains unlikely."

The Bank has cut interest rates three times since December and is making more money more easily available to banks, but the rates at which banks lend to each other remain elevated and the credit crunch is starting to spread out of the financial sector.

Banks have actually been raising their mortgage lending rates even as official borrowing costs have been falling, making buying a home less affordable, especially as house prices have roughly trebled in the last decade.

RICS said new buyer enquiries fell at their fastest pace since March 2003 and the ratio of sales compared to the stock of unsold property on the market fell to its lowest level since September 1996.