Rightmove: House prices drop a return to reality

The average asking price of property dropped 1.6 per cent in August following a record high in July where the average price climbed to 2.9 per cent to £217,580.

The average asking price now stands at £214,040, a drop of £3,540, according to a new survey by Rightmove, which has been monitoring house prices since August 2001.

The south-east saw the biggest drop in prices, with the average property value going down 3.6 per cent or £9,773 in a month.

The west Midlands also saw a 2.4 per cent fall, prices in the south-west dropped two per cent, and prices fell by 1.5 per cent London and the north of England.

Rightmove said the figures showed the south of England "miniboom" was "out of steam", and that prices had peaked due to "interest rate climate changes", however this was not bad news.

The online estate agent said the drop was indicative of a seasonal slowdown and increasingly stretched buyer affordability, which signalled a "return to reality".

The fall is the largest since November 2004.

Miles Shipside of Rightmove said: "Prices have passed their peak for 2006. The record price levels seen so far this year were driven by the south of the country.

"With that market cooling, and the signals from the Bank of England that interest rates may move up again, sellers may have to reduce their price expectations.

"This welcome dose of reality is good news for buyers, especially in the south of England, where many have been priced further out of the market by the strong growth during the first half of the year."

Mr Shipside added that there would be no need for the Bank of England to raise interest rates again, as another up in base rate would damage the property market.

Rightmove measured 167,399 asking prices of properties put on sale by estate agents from July 8th to August 12th 2006 on Rightmove.co.uk, which represents around 75 per cent of the UK market. XXX