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Worst July for house prices, says Rightmove

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Date: Monday 21 Jul 2008

LONDON (ShareCast) - House prices fell by more than £4,000 this month from June as homeowners are forced to get real and compete with other sellers if they want to get rid of their property.

The cost of a home dropped 1.8% in July, the biggest fall for the month ever recorded by online estate agent Rightmove and nearly twice the previous largest decline.

It’s also the first time Rightmove has measured a year-on-year fall, with the average asking price down to £235,219, some 2% less than this time last year.

“Sellers are finally recognising that they need to undercut their rivals from the outset, rather than testing the market and dropping prices later,” said Rightmove commercial director Miles Shipside. “Whilst this £4,000 reduction is on top of a £3,000 drop last month, sellers’ pricing needs to be at the level where deals are being done.”

The level of unsold stock rose for the sixth month in a row to a record, with each estate agency branch currently holding an average of 77 unsold properties on its books rather than 74 last time.

“We are measuring very low levels of new sellers for this time of year, around 20% down on 2007,” added Shipside. “This has a limiting effect on the supply of unsold property, unlike America where excessive new build and forced sellers have really flooded the market.”

He says banks and building societies must complete a u-turn in current lending policies if there is to be any meaningful increase in sales volumes.

“Following lenders’ irresponsible lending in the late 1980s, there was a similar over reaction to risk that is repeating itself now. So banks need to be careful they do not get blamed for a second crash in 20 years,” said Shipside.

The news comes as mortgage lender Woolwich cut rates today as wholesale borrowing costs ease. Its three-year fix comes down to 6.29% from 6.49%, just a few days after Nationwide announced cuts of its own.

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