Price falls burst housing bubble

THE South of England is dragging the housing market towards a slowdown as the boom in prices hits a brick wall, official figures reveal.

The region is where the Land Registry has recorded the first price falls in England and Wales for two years. They are in the London boroughs of Islington, Wandsworth, Lambeth, Westminster, and Hammersmith and Fulham, where some of the country's most expensive homes are found.

These areas are the first to buck the trend of rising prices recorded in all boroughs and local authorities during the latest boom. The reductions are expected to ripple out across the rest of London, the South-East and throughout the country during the next two years.

Already, the annual price rise nationally has fallen from 19.7% to 12.5%.

The Bank of England predicts the market will stagnate by the end of this year, with zero price rises nationally. Other analysts, however, have gone further with grim warnings of an 8% fall in 2004 followed by a similar drop in 2005.

The Land Registry data covers the quarter from April to June, comparing the information with the same period last year. While there have been anecdotal reports of price falls from estate agents, its figures provide the first official evidence.

The average price of a home in England and Wales is £149,935, a rise of 12.5% from a year ago. The study shows a sharp fall in the number of sales nationally, down 16.3% to 245,632.

In London, sales crashed by more than a quarter to 28,911. This follows the collapse in the number of first-time buyers to a record low as they are priced out of buying their own home.

The Land Registry figures show a price fall in Westminster from £468,378 to £459,517, while the average sale price is down from £355,350 to £346,103 in Hammersmith and Fulham. The fall in Islington is put at around £6,000 to £284,857 while reductions of less than £2,000 were seen in Lambeth and Wandsworth.

Despite the falls in these boroughs, average prices in the capital were still up by 5.9%, to an average £246,710.

Annual price rises for the region outside London have fallen from around 22% to 15.9%. This puts the average price of a home at £194,924.

The study makes clear that price rises 'north of Watford' have been spectacular over the past year, running at more than 25%. However, even these areas are beginning to see a slowdown.

The top performer has been the East Midlands, where the annual rate of price rises has fallen back from 27.7% to 24.9%. The price of the average home in the region is put at £120,759.

The only area where the annual rate of increase has not fallen is Wales. There, the figure rose fractionally to 23.66%, putting the average house price at £98,186. A recent study by the property website, Hometrack, suggested asking prices are already being marked down in Sussex, Surrey, Bedfordshire and the Avon area.

Gloomier conditions are also being reported in Berkshire, Buckinghamshire, Essex, Hertfordshire, Hampshire, Kent and Oxfordshire.