Following two months of zero growth, the latest survey showed that prices fell by 0.1 per cent in October. Hometrack has said it fully expects prices to fall further in the months ahead.
Average prices were down by between -0.1 and -0.2 per cent across all regions except for the West Midlands where values remained unchanged.
Richard Donnell, Hometrack's director of research, said: "After several months of weaker buyer confidence, falling levels of demand and declining sales volumes, prices were bound to be affected. If anything the current uncertainty appears to be resulting in a decline in the numbers of homes coming to the market which is likely to support underlying prices in the coming months."
The latest survey shows that the areas registering above average house price falls over October, of between -0.3 per cent and -0.5 per cent, are largely concentrated in the higher value areas of London and the wider South East such as Central London and City (-0.5 per cent), London - South West (-0.4 per cent), Hampshire (-0.4 per cent), Cambridgeshire (-0.3 per cent) and Oxfordshire (-0.3 per cent). These areas have all registered very strong price rises over the last 2 years on the back of robust, equity fuelled demand and a lack of housing for sale. Coming off such a high base, these areas are the most sensitive to the current weakening in demand.
The recent Hometrack survey shows how a combination of higher interest rates and weaker confidence has impacted on the key market dynamics. Buyers have stepped back from the market and for the last 4 months there have been falling levels of demand.
There was a -6.4 per cent fall in the number of buyers registering with agents over October, with new buyer registrations down 17 per cent over the last four months. This, in turn has resulted in a decline in the numbers of sales being agreed which was down -4.8 per cent in October.
"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," commented Donnell.
This weakness means that the average length of time a property is on the market is rising rapidly, up from a recent low of 5.8 weeks in May 2007 to the current 7.4 weeks in October. This return to a buyer's market is taking its toll on asking prices and the proportion of the asking price being achieved.
Nationally agents report that buyers are achieving 94.3% of the asking price, down from 94.8 per cent last month. History shows that the closer this indicator moves towards 94 per cent and below then the greater the extent and scale of any falls in achievable prices.
"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. The scale of these falls is likely to be limited by a lack of supply coming to the market for sale.
"The last time we saw a similar fall in demand was back in 2005 but this was accompanied by a sizable increase in the supply of homes for sale. This is currently not the case and as a result we expect headline price falls to be relatively limited in the run up to Christmas and the New Year," Donnell concluded.
