Potential sales have been falling through because buyers and sellers cannot agree on price. The RICS says confidence has been shaky with buyers unprepared to take on long-term commitments.
This is despite a sharp fall in the number of households suffering from negative equity. Figures published yesterday by Woolwich Building Society showed that there were 950,000 households in the negative equity trap at 30 June, a 16 per cent drop from the end of the first quarter of 1994.
This is the first time the figure has been below a million since the last quarter of 1991.
Peter Miller, RICS residential property spokesman, said: 'High summer is witnessing a slowdown in the pace of recovery as potential homebuyers, unnerved by talk of interest rate rises and frustrated by lack of choice, turn their attention to the holiday season.'
Four-fifths of the 136 estate agents surveyed said activity was the same or lower than in the first quarter of the year.
More than 70 per cent said selling prices were unchanged although there were sharp regional variations.
London, East Anglia and the South-east enjoyed the best of the recovery while the North-west had the weakest market.
The prices of houses also rose more quickly than those of flats and maisonettes.
Country houses enjoyed the highest price rises between April and June, with 8 per cent of agents saying prices had risen by between 2 and 5 per cent during the period.
Martin Ellis, chief economist at the Woolwich, said that about two- thirds of households were coming out of negative equity because of increases in house prices while the other one-third were repaying capital.
'Some of the fall has been generated by people paying off their negative equity with capital sums,' he said.
The biggest fall in the number of households with negative equity was in the South, where 50,000 were released.
Households with negative equity represented about 6 per cent of owner-occupied households in the UK. The total value of negative equity has fallen from pounds 8.5bn in the first quarter to pounds 7bn in the second quarter.
But the average amount of negative equity per household has remained stable at pounds 7,500.
The Woolwich said that more than 800,000 households have come out of negative equity since its peak at the beginning of 1993.
The society calculates its figures by using the Halifax house price index and on information on capital repayment from the Building Societies' Association.Reuse content