Hometrack: First falls in house prices for 2 years

House prices have fallen for the first time in two years, according to research released today by housing intelligence business Hometrack.

Prices were down by 0.1 per cent in October according to the organisation, following two months of zero growth.

As a result, the annual increase in average house prices has now fallen to 4.4 per cent across the country, down from five per cent in September.

"The fall in prices over October is not unexpected. After several months of weaker buyer confidence, falling levels of demand and declining sales volumes, prices were bound to be affected," commented Richard Donnell, director of research, Hometrack.

"We expect further small price falls in the months ahead but these are likely to remain limited as there remains no evidence of any increase in the supply of homes for sale."

The largest falls were recorded in some top-end areas.

Central London and the City saw prices fall 0.5 per cent, while Hampshire and Cambridgeshire have seen prices down by 0.4 and 0.3 per cent respectively.

All three areas witnessed strong price growth over the previous two years and are now acutely sensitive to slowing demand.

Indeed, falling demand has been behind falling prices across the UK.

Higher interest rates and weakening demand have combined in recent months to discourage buyers from entering the market.

There was a 6.1 per cent fall in the number of new buyers registering with estate agents in October, compounding the 17 per cent fall experienced in the previous four months.

"Sales volumes are the first to feel the impact of weaker demand. A further decline in sales volumes is inevitable over the months ahead as buyers, the majority of whom do not need to move, wait until the outlook for the market and interest rates become clearer," continued Mr Donnell.

Long waits for sales have also been recorded, as fewer buyers enter the market.

It now takes an average of 7.4 weeks to sell a house, compared to a low of 5.8 weeks in May 2007.

Some 94.3 per cent of homes reached their asking price in October, down from 94.8 per cent in September.

"Overall we expect the rate of house price growth to slow further over the coming months with further small price falls likely in markets where achievable pricing levels are falling into line with demand.

"This is likely to be focused on the markets that have seen the greatest price rises over recent years with values in localised areas falling back off a high base," concluded Mr Donnell.