Homes glut keeps prices falling

HOUSE prices dropped for the tenth consecutive month in April thanks to a glut of properties up for sale. According to property analysts Hometrack, pre-General Election uncertainty has also put off some would-be buyers.

The Hometrack survey is based on agreed sales reported by estate agents. Its measure fell 0.1% in April, representing a 1.5% drop on a year before, the worst annual performance in the five-year history of the survey.

Hometrack predicted that property prices will start rising over the next few months, and maintained its 2005 house price inflation forecast of 3%. That is less than the current Retail Price Index inflation rate of 3.2%.The monthly fall left the average property price at £162,100, down from £162,300 in the previous month and from a peak of £167,700 in June last year.

Despite the 0.1% fall in the housing market in England and Wales in April, there was a ray of hope for property investors - price falls in each of the last four months have been reducing in size, which suggests that the market is stabilising. Even so, Hometrack's prediction for the full year is a 3% increase in house prices, which is less than the current Retail Price Index inflation rate of 3.2%.

Canny buyers, meanwhile, are still negotiating hefty discounts of more than 6% on the asking prices of homes because estate agents still have a lot of property on their books that is proving stubborn to shift.

John Wriglesworth, Hometrack's housing economist, said the looming election had caused jitters but this was only temporary. He is bullish on the outlook for the market, predicting a bounce after the election, whichever party wins.

'Interest rates, which may rise after the election, are expected to remain historically low, as with unemployment, despite Rover's collapse. Mortgages are still very affordable and incomes are continually rising. There are no fundamental reasons why the market should not recover, confidence is the key. We continue to predict 3% house price inflation for the year.'

More people are looking at property and estate agents report a rise in the numbers of prospective buyers returning to the market. Some of this reflects the start of the annual house buying season after Easter but Hometrack reported a 27.3% increase in the number of buyers registered with agents since the beginning of the year.

The increased number of prospective buyers will not push up prices, however, because the backlog of properties registered with estate agents means there is still a considerable oversupply.