House prices are set to fall by 5% this year said the Royal Institute of Chartered Surveyors (RICS) today, but the most striking impact of the credit crunch could be on sales transactions, which could drop by up to 40%.

RICS says property sales are already down 31.7% from last year’s level and a halving of sales volumes could lower consumer spending as the lack of movement has an impact on sales of household goods and furnishings, but the report also points out there are many indicators that the market will remain reasonably robust.

‘The second half of 2008 will prove a difficult period for the housing market,’ said Simon Rubinsohn, chief economist of RICS. ‘Money looks set to remain tight and many will find access to the market is restricted by cautious lenders. Demand will remain pent-up with many watching the high street banks for any sign of a softening in lending criteria.’