Property market 'slows despite rate cut

The average asking price of a UK home fell 0.2% over the last month, the property website Rightmove said today.

This follows a decrease of 1% in July, meaning prices have fallen by a total of 1.2% (£2,360) since June according to Rightmove's August house price index.

The average asking price is now £196,282, just £84 higher than in July 2004. The annual increase for this time in August is slightly higher, at 2.1%, but this is due to a slump in mid-August 2004.

Some 118,000 new sellers have had to adjust prices down this month due to an oversupply of houses on the market. The number of properties for sale in each estate agent in the country grew from an average of 71 in July to 72 in August.

Rightmove takes its monthly readings for house prices in the middle of the month, so its "August" reading is in fact for mid-July to mid-August.

The survey also showed that completed sales for April to June were the lowest volume since 1998.

But Rightmove said that there were indications that market conditions are improving, noting that sellers were making "sensible adjustments in prices to improve buyers' affordability".

The "overdue" interest rate cut to 4.5%, said the property website, would also boost buyers' confidence, although this would not lead to a rise in prices, because of the "abundance of unsold property".

"Activity will pick up but higher prices will not be achieved until more first-time buyers can afford to get on the property ladder," said Miles Shipside, commercial director of Rightmove. "However, that's still some time away and requires a continuing downward movement in interest rates."

Mr Shipside said that sellers had to be realistic about the price they could achieve for their properties.

"More estate agents are declining to market properties if the seller wants to try for too high a price,

"It's a tough message to sellers, but if an estate agent has already got similar or cheaper properties that are not selling, they are thinking 'why have more?'.

Mr Shipside said he expected a continuation of static asking prices this year because of the high number of unsold properties.

"Although buyer demand appears to have picked up, property stocks are still at historically high levels," he said. "In most parts of the country it will therefore remain a strong buyer's market until at least the spring of 2006."

Howard Archer, economist at consultancy Global Insight agreed that sellers had to be realistic about asking prices.

"The Rightmove housing market survey for August is relatively subdued overall, showing that it remains very much a buyers' market as the supply-demand balance is currently slanted markedly in their favour," he said.

"The survey also reinforces the view that sellers are becoming more realistic in their pricing, which will support levels of housing market activity."

Rightmove said that prices varied widely around the country. While Wales saw house prices increase by £11,608 (7.2%) to an all-time high of £172,952, the west midlands and the north recorded a rise of just 0.4%.

East Anglia and the south-west recorded falls in asking prices, of 0.5%, and homes in Greater London fell by 1.6% to an average asking price of £280,452.

The situation for homeowners was worst in the south-east, where they saw a drop of 2.2% in asking prices, bringing the average price of a home to £237,152 - some £5,211 less than in July.

The Woolwich added to the property gloom when it said today that its July index showed confidence in the housing market has remained stuck at a lower level than last year for the fourth consecutive month.

July figures show the same 49% of homeowners expect prices to rise in value over the next 12 months, compared to 62% this time last year.

The least confident region appeared to be the east, with just 43% of homeowners expecting prices to rise and 9% forecasting decreasing house prices. They were closely followed by the south-east, where 44% predict prices to rise.

Andy Gray, head of mortgages at the Woolwich, said it was open to debate whether a quarter point cut in interest rates would affect the market.

"It's the first cut in the base rate for two years, so this is our best chance to shake the housing market from its lethargy," he said. "Those with existing mortgages will be able to loosen their belts a little, but whether it is enough to entice more buyers to the market is open to question. We will look with interest to see how buyers respond."

Figures from the Land Registry released last week showed that house prices in England and Wales had risen at the lowest annual rate since 1996.

And Countrywide, the UK's largest chain of estate agents, who jointly own Rightmove, said on Thursday that it had suffered a loss for the first time in a decade. The firm's chairman, Christopher Sporborg, described last winter's housing market as "quite simply appalling", adding that the number of house sales exchanged in the first half of 2005 was almost a third lower than a year earlier.