Jan. 16 (Bloomberg) -- U.K. real-estate professionals said December was the worst month for the housing market since the aftermath of Britain's last recession in 1992.

The number of real-estate agents and surveyors saying prices fell exceeded those reporting gains by 49.1 percentage points, the Royal Institution of Chartered Surveyors said today in London. That compares with 40.6 points the previous month. In the capital, confidence in prices fell to the lowest since 2003.

An end to the U.K.'s decade-long housing boom may threaten economic growth as falling home values discourage consumers from spending. Economists forecast the Bank of England will cut the benchmark interest rate for a second time next month after a reduction in December to guard against fallout from the collapse of the U.S. subprime mortgage market.

``The housing market is clearly feeling the pinch from the credit crunch and the round of interest rate hikes in 2007,'' Ian Perry, a spokesman for RICS, said in a statement. ``The Bank of England may have to cut rates further if the market is to remain in a stable condition.''

A measure of expected prices slid to minus 62 from minus 47 in November, both the lowest since RICS started collecting data on the outlook in Oct. 1998, the report showed.

`Very Quiet'

All 12 regions represented in the RICS survey showed price declines. Northern Ireland and East Anglia posted the worst results, with balances of minus 82 and minus 81, respectively. London's reading fell to minus 54 from minus 27 in November.

``Very quiet in December, with little to give the market confidence, unless we see another drop in interest rates,'' Christopher Philpot, real estate agent at Lacy Scott & Knight in East Anglia, said in the statement.

The economy is still strong enough to create jobs, helping households to meet their mortgage payments. Unemployment fell in December to the lowest since 1975, the statistics office reported today, and wages rose 4 percent in the quarter through November.

Other reports have also shown a weaker property market. HBOS Plc, the country's biggest mortgage lender, said Jan. 8 house prices fell 0.8 percent in the three months through December, the first quarterly drop since 2000. Nationwide Building Society said that values fell 0.5 percent in December.

U.K. stocks extended their slide today, partly on concern falling house prices will curb consumer spending. The FTSE 100 Index fell 1.4 percent, taking its drop this year to 8 percent.

``The case for a rate cut is clearly pretty strong for February,'' said Simon Rubinsohn, chief economist at RICS, in a Bloomberg television interview today.

Retail Gloom

The Bank of England last month reduced its benchmark to 5.5 percent as consumer spending showed signs of weakening, and a Bloomberg News survey of Jan. 4 showed most economists forecast the rate to fall to 4.75 percent by the end of 2008. Tesco Plc and Marks & Spencer Group Plc reported a slump in retail sales over the Christmas holidays as shoppers reined in spending, prompting both to call on the central bank for more rate cuts.

Chancellor of the Exchequer Alistair Darling, concerned economic growth is beginning to slow, has urged financial institutions to pass on lower interest rates from the central bank to customers. Banks raised rates on mortgages fixed for two years last month even as the central bank lowered borrowing costs, the Bank of England reported on Jan. 10.

The central bank forecast in November U.K. growth would slow this year to about 2 percent from about 3 percent in 2007. The bank publishes new growth and inflation forecasts on Feb. 13.

Dwindling Supply

RICS, which lobbies for about 150,000 property surveyors, said in a Dec. 20 statement that pent-up demand and interest rate cuts will prevent a slump in the U.K. property market this year.

First-time buyers had been shut out of the market as prices tripled in a decade and supply dwindled. Construction of new homes in Britain stagnated at 148,000 units a year on average between 1989 and 2005, down from a peak of 425,000 in 1968.

``Supply would have to loosen considerably before prices experience a significant dip,'' Perry said. Today's report shows stocks on the books of real-estate agents rose to an average 76.9 from 71.8 the previous month.

Still, homebuyers may be further discouraged from browsing property as U.K. banks plan to make fewer loans to consumers and companies in the first quarter, according to the Bank of England's quarterly survey on credit conditions, published this month.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

Last Updated: January 16, 2008 07:27 EST