Average prices in the Midlands have fallen by 11% in a year and sales volumes have decreased even faster, says the latest Knight Frank review of residential property in the region.
'Only a reduction in building costs, a relaxation of lending criteria and a boost to consumer confidence can repair the ever deepening cracks,' the report warns.
Sales of new homes have been particularly affected. The West Midlands has experienced a 19% fall in new home prices compared with 11% in the East Midlands.
More worrying is a 35% fall in sales activity which the report says is creating frustration and if not enough new homes are built in the area there will be a severe shortage of housing when the market does recover.
In Bristol, south west England, house prices are falling at their fastest rate since the early 1990s and further falls are expected, according to a report from DTZ.
As far as the office sector is concerned the analysts point out that just one of the three big speculative schemes planned – Cabot Gate, Bank Place and Finzel's Reach – would actually begin construction in the near future.
The overall situation needs intervention from government, banks and lenders, the Knight Frank report concludes. 'The decline could be lessened through a reduction in interest rates or the abolition of stamp duty for first time buyers,' it states.
But analysts don't expect any reaction. 'However mounting inflationary pressures and concerns over government budgetary reserves suggest that neither is likely in the immediate future.'
