The latest RICS UK residential survey based on surveyor sentiment has the lowest readings across the board for three years although surveyors expect a more stable picture in the coming months.
Property stock levels hit record lows with just 5% of those polled seeing a rise rather than a fall in prices.
London has suffered a shock fall with a price indicator drop of -33% with higher numbers expecting house price falls over the next three months.
Across the UK, 34% more respondents reported a fall in transactions, with the monthly pace of decline in both July and June at the fastest since 2008. This reflects a continuation of a trend that started back in April following the implementation of the tax surcharge on investment purchases.
“Anecdotal reports provided by contributors to the survey suggest both the tax change and the ongoing fall-out from the EU referendum are contributing to the current mood in the market,” said RICS.
However, surveyors continue to report hugely varying conditions up and down the country with some suggesting activity has returned to normal after an initial wobble, while others feel Brexit has only had a very modest or negligible impact.
Simon Rubinsohn, RICS chief economist, said: “However the rebound in the key twelve month indicators in the July survey suggest that confidence remains more resilient than might have been anticipated.
“Critically, it is hard to escape the stark message regarding supply that is evident in the latest set of results with RICS data showing inventories on agent’s books around historic lows on average. This is a long running story that may have been exacerbated by recent events but clearly needs urgent action from the new government.”
Jeremy Blackburn, RICS head of policy, said PM Theresa May is right to identify house building as a key priority and any plan needs to include a strategy for the private rented sector.
“Any new PRS [private rented sector] policy should focus less on penalising small landlords and more on incentivising an institutionalised PRS, building at scale and managed to higher standards across our major cities.”
He said we must pull all the levers available including councils, housing associations and community land trusts across all delivery mechanisms.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “On the ground we are finding that a sense of realism has returned to the market and that genuine sellers and buyers are negotiating hard to make deals happen. Clearly there are some buyers who feel it is just too uncertain at the moment but most seem determined to go ahead. In any event, prices are being underpinned by a continued shortage of property although we have noticed first-time buyers are still quite active and investors from abroad are showing more interest in the market.”
