British surveyors reported the most widespread fall in house prices last month in the 30-year history of their RICS market survey, suggesting the property downturn is gathering pace.
Sterling fell to a fresh record low against the euro after the Royal Institute of Chartered Surveyors survey today as investors fretted the weak housing market would take its toll on the broader economy.
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 the survey began in January 1978 and well below forecasts for a reading of -67.5.
"The risks of a serious housing-led slowdown in the UK are rising by the day," said George Buckley, chief UK economist at Deutsche Bank.
Prime Minister Gordon Brown is due to meet top retail and investment bank executives in London on Tuesday to discuss the impact of the global credit crisis ahead of a trip to the United States.
The RICS figures, released at the same time as a gloomy retail sales survey from the British Retail Consortium, 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.
The BRC survey showed like-for-like retail sales fell in March for the first time in two years.
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 BoE has cut interest rates three times since December and is making 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.
A separate report published today showAnnual British house price inflation eased to a 19-month low of 6.7 per cent in February from 8 per cent in January, the Department for Communities and Local Government.
In the month of February alone, house prices fell by 1.6 per cent. Annual house price inflation in London also eased markedly, to 9.5 per cent from 13.8 per cent in January.
The government's figures are based on sale completions and thus lag other surveys. Still, they tally with other data showing Britain's once red-hot housing market is cooling fast.