Demand for housing fell in May for the first time in three months putting downward pressure on house prices once again, according to the latest survey of estate agents by Hometrack.
The property analytics business predicts that prices will end the year 1 per cent lower and that demand for housing is likely to continue to post further modest declines over the summer, with sellers forced to cut prices in areas outside London.
However the trend in the capital city remains upwards, with London properties posting a small but significant average price increase of 0.2 per cent in May. In comparison, prices outside the capital fell 0.25 per cent in May, following a 0.2 per cent decline in April.
Richard Donnell, director of research at Hometrack, said: "The disconnect between housing market activity in the capital and the rest of the market is set to continue. In London the average time for a property on the market is less than six weeks, while in the Midlands and North the time between a property going to market and going under offer is, on average, more than 11 weeks."
With a slowdown in the number of sales being agreed, agents will look to reduce prices of stock already on the market as a means of maintaining volumes and driving revenue, Mr Donnell warned. "When demand starts to fall, sellers are typically forced to accept price reductions on their property."
He said that rising levels of supply are also adding to the downward pressure on prices.
From a broader perspective, he linked the health of the housing market over the short term to households' expectations for their own finances, the prospects for the wider economy and interest rates. "Spending cuts and tax changes are clearly impacting on disposable incomes and consumer confidence and the housing market cannot escape the impact of these macro influences," Mr Donnell said. "Yet there are segments of the market that are more robust than others, largely as a result of limited supply and equity-driven demand."
Meanwhile, figures published today by the Halifax show that over the last decade house prices have more than doubled in the majority of seaside towns in England and Wales, rising at a faster rate than properties generally.
Nitesh Patel, housing economist at Halifax, said: "Seaside towns have always been popular places to live, but they have perhaps become even more so in recent years.
"They have a distinct advantage over urban areas in offering that all important sea view, and they typically have a high quality of life and a healthy environment," he added.
The largest increase was in the Cornwall town of Wadebridge where the average price jumped by almost 270 per cent, from just over £100,000 in 2001 to £370,902 in 2011.
Maryport, close to the Lakes in Cumbria, was second on the list, where the average house prices rose by 192 per cent from £40,932 in 2001 to £119,604 in 2011. Tenby in south Wales was third on the list, with an increase of 186 per cent. Mr Patel said the attraction of seaside homes is also partly driven by sentiment: "There is a romance associated with living by the sea."