NUMBERS of sales in the residential property market in the UK have fallen at their sharpest rate since the late 1980s housing crash - but sales in the south are holding firm.

Nationally the number of sales has fallen from 146,000 homes in August 2002 to 99,000 last month, says the Inland Revenue.

South coast estate agents Goadsby & Harding believe that the region's high levels of employment - combined with the fall in historically low interest rates - are underpinning local confidence.

Goadsby & Harding residential director John Tofield said: "I think that we are beneficially cocooned here.

"We are insulated from some of the pressures that have occurred elsewhere. Employment is not a problem and we are still quite a wealthy area."

Increases in property prices had offset falls in transaction numbers over the last year.

The average property price in Hampshire is, according to building society Nation-wide, £156,526, although housing associations put the price nearer £190,000.

Lombard Street Research UK believes that part of the decline nationally "may be related to concerns regarding the war in Iraq".

While the 99,000 transactions figure for June may sound substantial, it is sharply lower than in any period since 1997, said Lombard Street Research spokesman Matthew Jackson.

"Such a rapid slide in housing market activity has been seen only once before - the crash in the late 1980s."

Although "the housing market has weakened in 2003 . . . a crash still seems unlikely", he said.

Latest figures from the Council of Mortgage Lenders show that only 30,000 first-time buyers entered the market in June, compared with 48,000 a year earlier.

First-time buyers accounted for only 29 per cent of all mortgage borrowers, compared with 44 per cent in June 2002.

Despite the fall in the number of transactions, the fundamentals of the market are positive, investment experts believe.

"Property prices at the top end may be falling, but generally, across the board, the larger dynamic for property is so high in the UK," said one local analyst.

One of the prime factors in rising house prices is the fact that there is a housing shortage in the south.

Meanwhile, it emerged today that the average retired homeowner in Hampshire has £9 worth of equity in their house for every pound of cash they have.

The figures were released by finance giant Prudential to show how older couples can free up some of the high value of their homes to boost annual income.