Richard Donnell Director of Research at Hometrack,said:
This follows a period of 18 months over which house prices have firmed rapidly on the back of a potent mix of rising demand and a chronic lack of housing for sale. House prices were down across 30% of the country in August with gains in just 3% of the market.
"The signs of a slowdown and price falls have been building since the election was called back in April. This monthly survey of over 5,000 agents provides a strong litmus test from the front-line of the housing market. For the last few months there have been clear signs that an underlying trend in market conditions was starting to change on both the supply and demand side of the equation.
"Firmer pricing and the abolition of Home Information Packs (HIPs) have resulted in a surge of new properties coming to the market. But while the removal of HIPs has allowed sellers to once more put their homes on the market at no cost, so the commitment of vendors in agreeing to sales at realistic pricing levels, remains questionable.
"The unmistakable fact is that the availability of homes for sale has improved markedly and this has reduced the support for house prices provided by the scarcity of housing for sale over 2009 and early 2010.
"This comes at a time when there is growing weakness on the demand side - a weakness which represents more than just a seasonal blip. As we have previously reported, the first half of 2010 saw a below average increase in demand compared to previous years. More recently demand has started to fall month on month - for the last 2 months nationally and for the last 4 months in London.
"While the changing balance between supply and demand may have been building, the numbers of actual sales being agreed in agents offices has continued to increase in recent months. This has given agents a level of confidence over the sustainability of pricing levels despite growing concerns over the outlook.
"But in August the growth in sales agreed slowed, rising by just 0.8% compared to an average increase of 6% per month over the last 6 months. While this may be a seasonal trend, we expect lower sales volumes to continue - not least because much of the new supply is reliant on strong offers being achieved.
"This and recent surveys reveal a turnaround in underlying pricing levels as well as outright price falls. The proportion of the asking price being achieved has fallen to 93.5% in August from a recent high of 94.3% in June 2010. As demand weakens so this indicator is expected to move lower. The time on the market indicator has also started to rise, jumping to 8.9 weeks from a recent low of 8.3 weeks in May 2010.
"Against a background of a longer sales period, rising supply and faltering demand, prices need to adjust to a level where sales volumes can be maintained. We expect further modest price falls in the coming months.
"On a regional basis, prices fell in 9 of the 10 regions with no change in Wales. The South East and North West posted falls of -0.5% with London and East Anglia registering a -0.4% decline. The largest falls were seen in the southern regions, the same regions that witnessed the strongest recovery over the last 18 months.
"In the South East the proportion of the asking price achieved has dropped from an average of 95.3% over the last 6 months to 94.2% in August."
