Housing market confidence crumbles

LONDON (Reuters) - House prices fell at their fastest rate since May 2005 in the three months to November and surveyors' confidence in the outlook hit its lowest level since records began in 1998, a survey shows.

The Royal Institution of Chartered Surveyors' house price balance for November fell to -40.6 from a downwardly revised -23.4 in October.

This was below consensus forecasts and marked a fourth consecutive month of falling prices.

The pound fell and interest rate futures rose as investors speculated the figures increased the chances of another rate cut by the Bank of England in the near future following on from last week's quarter-point reduction to 5.5 percent.

Analysts said further cuts may be needed, in addition to steps announced on Wednesday to alleviate tensions on money markets, to stave off a sharp economic slowdown.

"With the downside risks to the "real" economy clearly rising, we do not see the concerted efforts on the part of central banks, including the BoE, announced yesterday as a substitute for lower policy rates," said Richard McGuire, strategist at RBC.

"We would expect policy makers to wage a war on two fronts heading into 2008 with lower policy rates in the UK & the U.S. clearly in prospect but further special measures to ease liquidity also likely."

DEMAND SLIPS

Weak demand meant the stock of unsold property on estate agents' books jumped by nearly 9 percent. As a result, the ratio of completed sales to the stock of unsold property fell to 33.1 percent, suggesting the market is looser than at any time since October 2005.