Home prices in surprise fall as Games factor fails to kick in

The Olympics have failed to bring the expected boost to the London property market, leading to a shock fall in national house prices for the first time this year.

According to Hometrack's survey, published today, prices slipped 0.1 per cent in July, the first negative index for seven months. Richard Donnell, the director of research at the firm, said: "The housing markets of London and the South East – areas that have supported headline price growth since the beginning of the year – are starting to slow as demand weakens and supply rises."

Last week's Land Registry house price index found that homes worth £1m or more – typically found in London – slumped 43 per cent from 825 to 468 in the year to April.

Hometrack today reveals that London was the only region to register a price increase in July – up 0.1 per cent – but the rate of growth has slowed compared with recent months. And the number of postcodes in the capital registering prices falls has started to increase.

Across the South East, the slide continued over the month with prices down across 35 per cent of postcodes – higher than the national average.

Nationally, demand for property fell by 2.1 per cent in July, with the South East posting the greatest fall, down 3.4 per cent. London also registered an above average drop, with new buy registrations down 2.4 per cent.

Supply levels climbed, with the number of new properties coming to the market rising by 1.4 per cent in July and by 5.2 per cent over the last three months. Demand fell by 2.2 per cent.

Mr Donnell warned that the gap between supply and demand is set to widen over the summer months, and points to further modest price falls through the summer and autumn.

"The seasonal slowdown has started earlier and developed more rapidly than in previous years," he warned.