Hometrack’s latest monthly survey of over 5,100 agents and surveyors shows that demand for housing in July dropped by -1.3% triggering the first fall in prices for 15 months.
Prices fell 0.1% in July; the last month on month price fall was in April 2009 when prices fell by -0.3%. Hometrack says the decline in demand is in part seasonal but the underlying trend for the last 5 months has been downwards.
In contrast, the supply of homes for sale continued to increase - rising by 3.6% in July. The abolition of Home Information Packs (HIPS) and firmer pricing has encouraged many would-be sellers to dip their toe into the property market.
The proportion of the asking price being achieved has dropped to 94% from 94.3% in June and looks set to decline further as pricing comes under pressure.
The one positive from the survey is that the volume of sales agreed increased by 3.7%. Despite this agents are marking prices lower as they see rising supply and faltering demand putting prices under downward pressure over the remainder of 2010.
Prices declined across 12% of the country in July compared to just 2.6% last month. Price rises were limited to just 5% of the market.
Prices fell across 5 regions and were static in the remaining 5 with London posting the largest monthly decline. Prices in London fell by -0.2% on the back of a 2.7% drop in demand and 4.5% growth in supply.
Commenting, Richard Donnell, director of research at Hometrack, said: “Levels of demand for housing have been slowing for the last five months - in July they fell by 1.3% triggering the first monthly fall in house prices for 15 months.
“Prices moved lower by 0.1% with the year on year rate of growth slowing to 2%. Further modest price falls are inevitable over the second half of the year as the volume of homes for sale continues to rise and demand remains weak on the back of concerns over the wider economic outlook and uncertainty over the impact of recently announced cuts in government spending.
“The fall in prices marks a turning point for the housing market following 12 months characterised by a lack of homes for sale and resurgence in demand, primarily for family housing in southern England. Equity rich, cash buyers, keen to move but hindered by a lack of supply, have driven up prices and sustained what essentially became a ‘one dimensional’ market.
“But in recent months, much of the pent-up demand which stretched back to mid 2009, has now either been satisfied or dissipated.
“It is hard to identify factors that will drive any marked increase in demand for housing in the coming months.
“With falling demand and rising supply, there is a real possibility of sales volumes declining. With no immediate prospect of an upturn in demand, price levels are likely to remain under downward pressure in the coming months.”
