Asking prices drop in homes 'reality check'

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Homeowners have been forced to cut the asking price on their properties by 1.2 per cent during the past month as the reality of the housing market downturn hits home, according to figures published by the property website Rightmove.

Householders in England and Wales had to reduce the cost of their home by nearly £3,000 during the five weeks to 14 June, with the average price tag on a property now at £239,564.

The fall – the first recorded during the peak month of June by Rightmove – followed a 1.2 per cent house price rise the previous month, and suggested that homeowners in the south of England were being worst hit by the stagnating market.

According to the website's commercial director, Miles Shipside, future sellers can expect to knock 10 per cent off what their house was worth at the height of the property boom. He added: "In spite of the lowest housing transactions for 30 years, new sellers had been coming to the market asking for record prices. It was a mad state of affairs that defied the laws of economics. Thankfully, new sellers are now taking some proactive steps to price more realistically."

Rightmove said that, although there was still a demand from people looking for the right property at the right price, the ratio of properties for sale to buyers had doubled over the past year to 15 to one. It added that the widening chasm between prices and what buyers were willing to pay was behind the falling level of UK house sales, and that a combination of the credit crunch and spiralling living costs meant those prices would have to drop even further to attract hard-up buyers.

The figures showed demand slumping most noticeably in the south of England, with asking prices dropping by 2.4 per cent in the South-east and by 1.4 per cent in London. Elsewhere, prices rose slightly, by 0.5 per cent in the North and 0.4 per cent in the West Midlands, though these are areas which have seen some of the steepest property price falls to date.

A spokeswoman for the Department of Communities and Local Government said: "When looking at trends in the market, it is important to remember that UK house prices are 44 per cent higher than five years ago.

"The current issue affecting the market is largely about the supply of credit ... The long-term demand for housing remains high and the fundamentals of the economy are sound."