RTTNews - Despite tentative signs of recovery, the fall in U.K. House prices is expected to continue for some more time, two separate surveys indicated Tuesday.

House prices in England and Wales dropped in June at their slowest annual pace in nearly two years, the Royal Institution of Chartered Surveyors or RICS said, citing its house price balance, which rose to minus 18.1 in the three months to June from minus 43.8 in May. The latest reading is the best since September 2007. Meanwhile, economists had forecast a modest improvement to minus 40.

Although the market is showing signs of improvement, it is unlikely that there will be a sustained upturn while mortgage lenders remain risk adverse, RICS spokesperson Jeremy Leaf said.

Elsewhere, professional services firm PricewaterhouseCoopers or PwC warned that despite tentative signs of recovery, house prices could still fall further next year. In its latest economic outlook for the U.K., PwC said with mortgage lending and housing transaction levels remaining subdued and with unemployment likely to continue rising for some time, average UK house prices are likely to fall further between 2009 and 2010.

Prices are projected to be broadly flat in 2011 and to recover only gradually after that, but there is a widening band of uncertainty around these longer term projections, PwC said.

John Hawksworth, head of macroeconomics at PwC said, Despite some recent reports of rises, we are not out of the woods yet by any means. It is important for buyers to take a long-term rather than a short-term view, he added.

But, a record increase in new buyer inquiries turned future price assessment positive for the first time since May 2007, RICS said. Moreover, the average number of properties put up for sale fell to 56.9 in June from 58.5 in May.

According to PwC's economic outlook, U.K. real gross domestic product would fall by just over 4% in 2009, but should start to pick up later this year and into next year, with modest average growth of around 0.5% in 2010. Destocking made a major contribution to the very sharp fall in GDP in Q4 2008 and Q1 2009 and the reversal of this stock adjustment could lead to quarterly GDP growth becoming positive again before the end of 2009, it said.

At the same time, the PwC warned that there is a risk of a temporary relapse into negative growth in early 2010 due to spending being brought forward to before the rise in VAT back to 17.5% from 1 January 2010.

Consumer spending is forecast to fall, by around 3.5% this year in real terms. A further but much smaller real decline is expected in 2010, with only a gradual recovery thereafter as households seek to reduce their debt burdens and return their savings ratios to more normal levels.

Public spending growth will remain positive in real terms in 2009 and 2010, but will need to be cut back in the medium term to bring under control a budget deficit that is projected to rise to over 12% of GDP in 2009/10 and remain around that level in 2010/11, the PwC report showed.

The report suggests that significant tax rises are also likely to be needed from 2011 onwards, over and above what the government has already announced.

Also on Tuesday, the British Retail Consortium said total retail sales grew 3.2% year-on-year in June, faster than a 0.8% rise in the preceding month. Same store-sales were up 1.4%, after falling 0.8% in May.

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