Property woes increase as slowdown bites

Britain's increasingly beleaguered property market was hit by further setbacks yesterday with a double whammy of bad news from the residential and commercial real-estate sectors.

The Council of Mortgage Lenders said mortgage lending in March was almost a fifth down on the same month last year, while the Royal Institution of Chartered Surveyors (Rics) warned that the commercial property market was suffering its worst slowdown for six years.

Mortgage lending in March was £26.3bn, the CML said, a 5 per cent increase compared with February. However, in a typical year, lending would rise by 20 per cent between February and March, as the housing market gets going again after the winter slowdown. The CML said lending in March 2007 totalled £31.7bn, 17 per cent more than this year's figure.

Michael Coogan, director-general of the CML, said there was worse to come. "The picture for mortgage approvals for new business and prospective lending levels in the next few months is worsening," he said.

Mr Coogan, who earlier this month warned mortgage lending would halve during 2007 without intervention from the Government and the Bank of England, called for mooted proposals to deal with the credit crunch to be published as soon as possible.

"We await the eagerly anticipated announcement of further action by the Bank to respond to these rapidly worsening conditions," he said. "Early action is needed if we are to be able to maintain a market in which UK borrowers continue to be able to access mortgage funds at reasonable prices."

Simon Rubinsohn, chief economist at Rics, said the state of the commercial property market was particularly worrying because it suggested that the effects of the credit crunch were really beginning to bite in the wider economy.

Rics said that 30 per cent more chartered surveyors reported a fall rather than a rise in demand for commercial property during the first quarter of the year, the most negative balance since 2002. The retail sector is suffering particularly badly, Rics said, with 40 per cent more surveyors reporting falling, rather than rising, demand, the worst figures on record.

Mr Rubinsohn suggested the figures reflected a slowdown in the economy with retailers and other businesses shelving expansion plans, or cutting back on existing premises.