Summer sale' of houses as sellers cut prices

Asking prices for houses have dropped 1% so far this month and the annual rate has fallen to a 10-year low, the website Rightmove.co.uk said today.

The monthly fall was the biggest since last November and followed a 0.2% rise in June. Sellers realised they would have to cut their price to attract scarce buyers, Rightmove said. The annual rate was just 0.2%, down from 2.4% in June. Rightmove's commercial director, Miles Shipside, said: "Sellers are finally willing to help bridge the affordability gap to attract greater volume of buyers, mimicking the retail high street by cutting prices in the fashion of a 'summer sale'.

"There are positive signals for both buyers and sellers, as increases in real wages combined with now static house prices over the past year mean that house prices are now 4% more affordable than at their peak last year," he added. All main house price measures have been falling back in recent months with most now showing prices only slightly higher than a year ago. House price inflation is likely to fall to zero in the coming months after peaking at 25% a couple of years ago.

While the Rightmove figures are not seasonally adjusted, they measure 125,000, or about half the properties on the market every month. The average asking price is now £196,649, it said.

Economists are split as to whether house prices are in for a sharp fall after the boom of recent years or a long period of stagnation but Rightmove said there were signs that demand was improving again after falling sharply late last year.

The Bank of England is widely expected to begin cutting interest rates next month in response to slowing consumer spending, the stagnant housing market and a moribund manufacturing sector. Rates are at 4.75% but analysts think they could finish the year at 4% or 4.25%, potentially putting a floor under the housing market.

Tomorrow sees the release of the Royal Institution of Chartered Surveyors' respected monthly report on the housing market.