House prices have fallen for the seventh month in a row as both buyers and sellers stayed away from the market.
The average cost of a home in England and Wales dropped by 0.5 per cent this month to stand at £153,600 – 2.2 per cent less than in January 2010, according to housing intelligence firm Hometrack.
Potential buyers continued to sit on their hands in the face of house price falls, and uncertainty over the economy and future interest rate rises.
Estate agents reported a further 9.5 per cent fall in the number of people registering with them, the seventh consecutive monthly decline, contributing to a 26 per cent fall in demand during the past six months.
But there were also further signs that homeowners are becoming increasingly reluctant to put their properties on the market, with the supply of new homes for sale falling by 5.4 per cent during the month – the biggest drop for four years.
Richard Donnell, director of research at Hometrack, said: “There are no signs of a New Year bounce for the housing market as 2011 begins with a sluggish start.
“The supply of new homes coming to the market continues to fall but it is the change in demand that we need to pay most attention to, as this will have the greatest impact on pricing levels in the first half of 2011. Concerns over the economic outlook and the biting reality of spending cuts are doing little to improve a fragile market defined by weak consumer sentiment and a lack of demand for housing.”
The group expects the number of sellers to continue to fall during the coming quarter, as people are forced either to reduce their price or withdraw their home from the market.
It said in the short term this would not be enough to offset the downward pressure on prices, but over the course of the year it would begin to act as a support and limit falls in values.
The sluggish level of activity in the housing market led to a further increase in the average time a home takes to sell, with this rising to 10.2 weeks – the longest period since April 2009. The percentage of the asking price sellers achieved also dropped to an 18-month low of 91.9 per cent.
Greater London and the South East saw the steepest price falls during the month, with the cost of property dropping by 0.6 per cent, while falls were lowest in the East Midlands and South West at 0.3 per cent.
But housing markets in the South are still seeing higher levels of activity, with the average property taking just over two months to sell, compared with being on the market for nearly three months in northern regions and the Midlands.