House prices dip in August

Average asking prices across the UK dropped by 1.1% to £229,767 compared with the previous month. They have dropped 3.4% in the last three months, according to Rightmove - half way towards wiping out gains made in the first six months of the year.

Asking prices are up by just 2.6% annually, a decline in real terms. In London, the average asking price fell by 1.5% to £390,768 this month. Prices are up just 2.1% over the past year, a cut after adjusting for consumer price inflation.

The data comes after retail sales unexpectedly dropped 0.5% in August – triggering fears that high inflation, weak earnings growth, a looming VAT hike and the threat of the government’s October Spending Review were threatening to derail the recovery. Most economists believe that economic growth will be weaker in the third and fourth quarter of 2010.

Commenting, Rightmove director Miles Shipside 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.”

But he emphasised that the data was not totally negative and could just be a blip, with a recovery ahead. Shipside said: “Those seeing this as a short term autumn blip rather than the onset of a serious double-dip, will point out tentative signs of a reduction in new property coming to the market.

“This has resulted in average unsold stock per agent stabilising after six consecutive monthly rises.”

Rightmove said the reduced number of sellers, in what is traditionally a busy time of year, is probably down to finances and sentiment being at a low ebb. Conversely, interest rates are low enough that home owners at financial breaking point have been able to avoid forced sales.

Nick Hopkinson, director at Property Portfolio Rescue, said: “Latest data from all the biggest estate agents confirms that house prices are going to fall just as certainly as the autumn leaves will fall off the trees in the next couple of months.

“In fact, outside prime London where supply is very limited, it is difficult to find properties that ever really saw price gains in the last year anyway.

“The ongoing 'mortgage famine' when combined with all the uncertainty of 'austerity Britain’s' budget cuts to be announced shortly on their own are probably enough to guarantee that prices will drop further in the next few months.

“If you add in the ongoing concerns over inflation, the threat of interest rate rises and that average household incomes are already being squeezed; it is hard to see on what basis house prices could ever have grown sustainably this year.

“The record levels of enquiries being received by businesses like ours from property sellers who are worried about their debts, have seen chains fall though or simply need a quick sale is a real worry.

“I don’t expect a sustained house price recovery until 2012 at the earliest and that will still depend on how interest rates and the national debt burden unfold.

“When even the estate agents are saying prices are on the way down, anyone considering selling their property should act fast and ensure they are being real about the price they can achieve.”