House prices continued to slide in England and Wales last month, falling at their fastest pace for six months and suggesting the spring bounce in the property market has run out of steam, a key survey showed yesterday.

The latest monthly report from the Royal Institution of Chartered Surveyors showed a balance of 40% of surveyors reporting price falls rather than rises, up from 39% the month before and not far shy of the 12-year high of 44% last November. The number of properties placed with estate agents rose at its fastest pace in two years.

While price falls in many regions were less than in recent surveys, London suffered a sharp drop after four static months, the report said. The London market is seen as an important indicator of where the rest of the market will go in a few months' time.

Rics chief economist, Milan Khatri, said the survey showed, like other recent reports, that there was a stalemate developing between buyers who were not prepared to pay the asking price and sellers who were not prepared to drop their price to make a sale.

"It is difficult to bring the two together. At the moment there is no forced selling," he said.

The report found that the number of property sales was down 30% from a year ago because of the stand-off.

Rics said some buyers were holding off last month because they feared interest rates rises after the general election.

In the event, the Bank of England left rates steady at 4.75% for the ninth month running. Its latest quarterly inflation report was interpreted by the City as indicating that rates were unlikely to rise further.

"The low number of property sales, together with a marked cooling in high street spending, suggests the Bank has achieved its desire to rein back household spending and borrowing, mitigating the need to raise rates again in the months ahead," said Rics. "A growing realisation that rates will not continue to rise could provide the catalyst for a gradual rise in sales in the second half of 2005," it added.

Economics consultancy Fathom was less convinced. It issued a report saying that half a million households would be hit hard in the third quarter by the expiry of cheap two-year fixed-rate mortgages taken out in 2003, when base rates were at their lowest for decades.

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