HOUSING market activity is down 30 per cent compared to this time last year according to the latest monthly housing survey from the Royal Institution of Chartered Surveyors (RICS).

The RICS suggests the fall in market activity is due to fear of post-election interest rate rises, which has held back many potential buyers from purchasing, despite improving confidence in the jobs market over the past few months.

Trevor Hines, RICS South East regional director, said: "The election campaign has certainly not helped in terms of confidence, with questions being raised as to whether the Chancellor would increase taxes to fund his ambitious spending plans.

"Post-election press speculation has suggested interest rates will fall to ensure retail spending doesn’t dry up. This may bring about growing confidence as we enter the summer."

Selling instructions in the South East increased but at a slower pace than the rest of the UK, which saw the strongest pace for more than two years.

With more houses coming on to the market, and completed sales in the South East rising only slightly, this has led to a growing stock of unsold property on surveyors’ books.

Mr Hines said: "The increase in supply reaffirms that we are currently in a buyers’ market, and agreed sales are being held back by sellers continuing to set unrealistic prices and failing to adjust to the changing market conditions which have seen prices in the South East fall."

House prices fell again in April, but at a slower pace than in the previous month. Market activity indicators such as buyer enquiries and newly agreed purchases remained flat for a second consecutive month.

"While sales have stabilised in recent months they remain significantly down on last year’s," said Mr Hines.

"The low number of property sales, together with a marked cooling in retail spending suggests that the Bank of England has achieved its desire to reign back household spending and borrowing, mitigating the need to raise interest rates again in the months ahead.

"A growing realisation that interest rates will not continue to rise, and could in fact fall, could provide the catalyst for a gradual rise in sales in the second half of 2005."