House prices take a further dip, says Hometrack

House prices fell 0.9% in October compared with September, Hometrack reported today.

There was a 2% drop in new applicants and a 1.9% increase in homes coming to the market, but a 3.8% uplift in sales agreed. But Hometrack said it expected transactions to fall.

More than half (56%) of postcodes registered price decreases, whilst the average length of time a property is on the market has risen to 9.6 weeks. In the East Midlands and Wales, the average time on the market is now over three months.

Richard Donnell, director of research at Hometrack, said: “House prices fell by 0.9% in October – the fourth monthly fall in a row and the largest fall since January 2009.

“Further price falls are inevitable in the run-up to Christmas and are likely to continue into the first half of 2011.

“Looking to the near term, there is little prospect for any material change in market fundamentals. The mismatch between faltering demand and increasing supply looks set to continue, while the re-pricing process is likely to be drawn out into the first half of 2011.

“A stand-off is beginning to emerge between buyers waiting for prices to fall further and sellers being unrealistic on the price they’re willing to accept. We expect a modest adjustment in prices rather than a return to the double-digit falls seen in 2008. Transaction volumes, already at low levels, are set to fall further.

“The first evidence of price falls was seen in London four months ago. Since then, buyer expectations over house prices have weakened significantly. Growing uncertainty over the economic outlook, and more recently, concerns surrounding the impact of the Spending Review have come at a time when we have seen an increase in the supply of new housing coming to the market. Together, these factors have combined to exacerbate a downward pressure on prices.

“Over the last six months the Hometrack survey has recorded a 14% increase in the supply of homes for sale, while demand has fallen by 8% over the same period.

“This mismatch continued over October with a 2% decline in demand and a similar sized increase in supply. The net result has been that a growing number of areas are seeing price falls.”

The Hometrack survey is based on responses from some 6,000 agents.