Oct. 18 (Bloomberg) -- U.K. house prices fell at the slowest pace in 14 months in September, the Royal Institution of Chartered Surveyors said.

A survey of 329 estate agents and surveyors showed those reporting price declines outnumbered those reporting price gains by 21 percentage points in the three months through September, down from 25 points in August, RICS said today in London. Price expectations turned positive for the first time in over a year.

``The market has returned to some sort of stability,'' said Milan Khatri, chief economist at RICS, in a telephone interview. Home prices may grow by 1 percent or 2 percent this year and next, he predicted. ``The slowdown as such is probably going to draw to a close soon.''

A decade-long property boom began to fade in 2004 after the Bank of England raised interest rates five times in less than a year to ward off inflation. In August, the central bank trimmed its benchmark rate by a quarter point to help revive Britain's economy, which grew at its slowest annual rate in more than 12 years in the second quarter.

Expectations about the likely movement in prices over the coming three months were positive for the first time since May 2004, with the number of surveyors predicting gains outnumbering those forecasting losses reaching 7 percent from -4 percent in August, RICS said. New buyer enquiries increased for the fourth consecutive month.

Higher Prices

The ratio of sales to available property on surveyors' books slipped in the month to 29.9 percent from 30.3 percent in August, suggesting any recovery in the housing market is likely to be gradual, the organization said. Prices fell in all parts of Britain expect Scotland, the RICS survey showed.

Today's numbers add to signs that demand for property may have bottomed out after the Bank of England cut in its benchmark interest rate to 4.5 percent on Aug. 4. House prices rose for the first month in four in October, a survey from Web site Rightmove.com said on Oct. 17.

A survey of 109,996 asking prices, or more than half the U.K. market, showed the average price of a home in England and Wales climbed 0.5 percent to 196,348 pounds ($343,687) in the four weeks through Oct. 8, according to the survey published yesterday by the Web site Rightmove.com.

The number of home loans approved by U.K. mortgage lenders reached the highest in 14 months in August, the Bank of England said Sept. 29.

The implied rate on the December futures contract was little changed at 4.53 percent as of 8:28 a.m. in London, suggesting traders don't expect any move in interest rates for the remainder of the year. The futures settle to the London interbank offered rate, a 90-day lending rate that has averaged 15 basis points more than the central bank's target for the past decade. Three-month Libor was set at 4.58 percent today.

``A busier summer than anticipated with higher levels of sales and viewings suggest the depression is over,'' said Richard Sayer, a surveyor based in Northumberland, north England, in the RICS report. ``First-time buyers are returning, confident that there will be no housing collapse and prices are likely to remain stable.''

To contact the reporter on this story: Sam Fleming in London at sfleming5@bloomberg.net

Last Updated: October 18, 2005 03:35 EDT