House prices in England and Wales experience seasonal slowdown

Property asking prices fell for the second month in a row during December as the market suffered its traditional seasonal slowdown, research showed today.

The 2.2% drop left the average property put up for sale in England and Wales during the four weeks to December 5 nearly £5,000 cheaper at £221,463, according to property website Rightmove.

But despite the fall, which came as the number of homes for sale hit its lowest level for 21 months, house prices are still 1.7% higher than they were 12 months ago.

All areas of the country saw a fall in asking prices during the month, except East Anglia, where they rose by 0.5%.

The North saw the biggest price slide at 5.8%, followed by the North West and South East, both at 4.3%.

The group said it expected to see a further price drop during the coming month, as winter sellers generally ask for lower prices in a bid to secure a sale.

It is then predicting a burst of activity and price rises in the early spring, before the housing market enters a "more challenging period" after the General Election.

Overall, it thinks asking prices will remain flat during 2010, after rising by around 2% this year.

But the group expects to see big geographical and socio-economic variations, with desirable areas where there continues to be a shortage of homes for sale seeing further price increases.

Miles Shipside, commercial director of Rightmove, said: "Sales volumes are still set to remain well down on historic norms, with the consequent thin-market danger of relatively small changes in economic fundamentals having a marked impact on asking prices.

"We have already seen how some local markets have been adversely affected by over-supply of property and a lack of mortgage-ready buyers, and more areas could become similarly blighted if forced sales increase later next year as expected."

The group expects only around one million homes to change hands during 2010, half the level seen in 2007.

But it warned that there could be more forced sales during the year, particularly if lenders showed less forbearance to borrowers who are in arrears after the election.

While the housing market is expected to have a subdued year during 2010, the rental one is expected to benefit from rising demand from people who are unable to buy their own home.

At the same time, the supply of rental properties is expected to fall as accidental landlords, who rented out their home after being unable to sell it, put their property on the market again.

Mr Shipside said: "Existing landlords will find themselves in an increasingly privileged position in 2010, where competition from new landlords is frozen out by a dearth of buy-to-let mortgages.

"In addition, tenant demand and landlords rental returns will grow due to demand from those who are unable to buy."