House prices slip further as sellers return

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House prices have fallen for the second month running, Britain's leading property website said today, and the decline appears to be accelerating.

Rightmove, the online property portal which lists 200,000 properties, said the average asking price has fallen 1.7 per cent over the past month, following a 0.6 per cent decline over the month to the middle of July. This latest fall equates to a drop in the average price of a home listed on Rightmove from £236,000 to £232,000.

Rightmove's latest housing index also reveals a number of other worrying signs that appear to support recent evidence that the market is now running out of steam.

The average number of properties available at each estate agent rose for the sixth month running, with new supply continuing to outstrip the speed with which more mortgage finance is being extended. That suggests that there is too much supply for current levels of demand in the market. In fact, the number of sellers joining the market during August, traditionally one of the quietest months of the year for property professionals, is the highest for three years – indicating that recent nervousness about the sector has not deterred people from putting their homes up for sale. Miles Shipside, Rightmove's commercial director, warned there is little prospect of any respite for the housing market in the months ahead. "There needs to be a spur to cause prices to rise, but as mortgages won't become available to the masses, and last year's shortage of housing stock on the market shows no sign of reappearing, we can't see it happening during the remainder of 2010," he said.

"For the market to gain some more headroom, we need to see mortgage approvals running at over 50 per cent of new listings. But for the last few months, this figure has struggled to consistently hit 40 per cent."

The Rightmove report echoes the analysis of almost every other tracker of house prices, with Nationwide Building Society, Halifax Bank, the Royal Institute of Chartered Surveyors and the Land Registry all reporting that the market has now gone into reverse.

However, while falling house prices are traditionally seen as detrimental to consumer confidence – and thus potentially damaging to the economy – Mr Shipside pointed out that struggling first-time buyers would welcome the falls, particularly with lenders now reluctant to accept smaller deposits.

He said: "The next 12 to 18 months could provide a window for those who can just meet minimum deposit and creditworthiness criteria, as affordably low interest rates and lower property prices could marry up. A period of higher inflation that outstrips flat or falling property prices makes buying even cheaper in real terms, as long as your salary is going up in line with inflation."

Mr Shipside added: "These are the conditions that over a few years could herald a sustainable housing market recovery, based on higher buyer volumes as opposed to stock shortages."