Slump feared as house prices fall for third month in a row

September saw house prices fall for the third month in a row, fuelling fears that the market is facing a second slump.

The average cost of a home put on the market in England and Wales for the five weeks to 11 September dropped by 1.1 per cent to £229,767, with mortgage approvals remaining not far off historic lows and estate agents having record levels of unsold properties on their books.

Property website Rightmove said new sellers have now reduced their asking prices by 3.4 per cent during the past three months. That equates to about £8,000 and means that half of the gains made by the market in the first half of the year have now evaporated.

The figures add to a mounting weight of evidence pointing to a slowdown in the housing market. The annual rate of house price inflation has slipped to 2.6 per cent to the 4.3 per cent in August.

Rightmove also said that the number of properties on the market had eased, with 26,100 put up for sale each week during the period in question, down 11 per cent in August. That is the lowest level of properties coming up for sale since April but this could ease fears that the market is being oversupplied.

A dearth of properties coming up for sale propped up the market during 2009 as sellers preferred to either stay put or rent their properties as a result of the difficult market. But there remains a lengthy backlog: estate agents still have a record average of 79 unsold properties each on their books built up from previous months.

Miles Shipside, director of Rightmove, said: "The 'double-dippers' will be able to point to a clear downward trend, with new sellers dropping their asking prices for three months on the bounce.

"They can cite tough competition amongst sellers and agents struggling to find proceedable buyers for their record levels of unsold stock.

"Conversely, we are also recording the lowest weekly run-rate of fresh sellers since April. This will give some ammunition to those forecasting a flatter price trajectory as it could be an early sign of fresh supply beginning to wane."

November and December are quiet months in the market and property prices now look set to end 2010 at around the level they started it.

Nick Hopkinson, director of landlord Property Portfolio Rescue, said: "Prices are going to fall just as certainly as the autumn leaves will fall off the trees in the next couple of months. I don't expect a sustained house price recovery until 2012 at the earliest."