House prices have suffered their biggest monthly fall this year after summer sellers dropped asking prices to more realistic levels, but sentiment in the market continues to improve.
The average asking price fell by 2.2 per cent, equivalent to £5,102, between 12 July and 8 August despite a scarcity of stock coming on to the market, the property website Rightmove said.
Miles Shipside, the commercial director at Rightmove, said the figures reinforced the company's view that the market would bump along the bottom before there is a return to consistent growth in house prices.
He warned: "After several months of activity and prices revving upwards from last winter's low point, both will start to hit the limiter without more mortgage finance. In spite of pent-up demand, the market and pricing is boxed in by restrictive lending criteria put in place to ration mortgages given the lack of funds available to lenders." However, other data suggest that market conditions are stabilising. The latest survey carried out for the Halifax found that house prices were now rising and that the cost of the average home had gone up by 1.1 per cent in July, to £159,623.
Asking prices fell by 1.9 per cent and 0.4 per cent in January and June, respectively, which were the only other monthly falls this year, according to Rightmove. The estate agency said the annual rate of increase remained unchanged at 3.1 per cent down, tying in with its forecast that average selling prices are "unlikely" to see further upward movement this year.
Furthermore, the number of new sellers this month is 48 per cent below the level seen before the credit crunch, as the scarcity of available mortgages continued to restrict transactions and property coming on to the market. But the online property specialist said this month's fall virtually mirrored the drop of 2.3 per cent in August last year.
In another positive sign for the market, Rightmove said 75 per cent of home owners did not expect prices to fall in the next year.