House prices down £12,000 in six months

HOUSE prices are ending the year lower than they began it in the capital. On average they are almost £12,000 lower than when the London market peaked in June, a survey reveals today.

Price monitors Hometrack predict a further fall of more than £13,000, with the delayed effects of the Bank of England's interest rate increases continuing to be felt next year.

The current average price in the capital is £264,000 - down from £275,900 in June.

John Wriglesworth, Hometrack's housing economist, said the Bank's decisions have had the intended effect on the market 'although they have taken some time to kick in'. He added that prices were rising 'at an unsustainable rate' before the downturn began in July, but are now adjusting to a new level.

December is traditionally a slow month for home sales, but this year has also seen a drop of almost 1% in sale prices. There were falls in 32 of London's 33 local authorities, with only Greenwich and Bexley remaining static.

Alongside falling prices, the housing market has also seen a major slowdown as buyers hold back hoping for better bargains. As a result, Hometrack estimates that London sales in the second half of this year were down 40% on the first half.

And while an average of more than 14 people still view every house for sale in the capital, acceptable offers now take almost seven weeks to materialise as buyers tender ever-lower offers.

The increasing desperation of sellers is also reflected in a growing gap between asking prices and eventual settlements. London buyers now regularly negotiate discounts of more than 8%.

Wriglesworth said: 'Buyers are sitting on the fence in anticipation of further price falls. We usually see less activity at this time of year, but this has been compounded by a continuing lack of demand over the past six months, not least due to the doom and gloom forecasts of housing commentators.'

One commentator, Ed Stansfield of the Capital Economics consultancy, said the correction in house prices which he has long predicted is clearly continuing. The consultancy is standing by its prediction of a 20% fall in prices over the next few years.

'House prices continue to fall and sales are reducing even more sharply,' Stansfield said. 'At the same time more new sellers are adding further to the stocks of estate agents. It seems likely that agents will go into 2005 with at least 10% more property on their books than at the start of 2004. So it is likely to remain a buyers' market.'

The Royal Institution of Chartered Surveyors is also pessimistic about the immediate future. Its survey this week confirmed findings from the Council of Mortgage Lenders that home loans last month were down 25% on November last year.