Study warns of house price falls

House prices have "stalled" and they could fall by up to 2% in the next six months amid the weak economy and the ongoing eurozone crisis, a study has warned.

The increase in new homes coming on the market has outstripped the numbers of potential buyers registering with estate agents for the last three months, and the gap is set to widen as the seasonal summer slowdown kicks in, property analysts Hometrack said.

Prices remained flat across England and Wales in June month-on-month, following three consecutive months of rises, and London was the only region to see an increase, with a 0.3% rise.

Prices were unchanged month-on-month in the South East and Wales, dropped by 0.1% in the East Midlands and the South West, and fell by 0.2% in East Anglia, the North East, the North West, the West Midlands and Yorkshire and Humberside.

The weakening demand from buyers was reflected in new buyer registrations with estate agents declining for the first time in five months, with a 0.5% month-on-month fall in June.

The study said the Olympics is likely to contribute further to the subdued housing market, which is showing signs of weakening in southern regions outside London, areas which have often performed relatively strongly.

The time a property takes to sell in these southern regions has risen to 8.4 weeks, from eight weeks in April, and sellers there are also showing they are increasingly prepared to "take a larger hit" on asking prices to push a sale through, Hometrack said.

Richard Donnell, director of research at Hometrack, said: "Overall, we expect uncertainty and weaker demand to result in prices slipping by 1-2% over the next six months as prices soften in higher value areas in southern England. The market continues to remain fragile in the regions away from southern England, where economic growth is more subdued and the balance between supply and demand is less pronounced."

He said that while low interest rates have helped to support prices, enabling people to borrow more cheaply, "the greatest risks in the short-term stem from the problems in the eurozone".

Prices also fell by 0.5% year-on-year in June and the greater difficulty faced by borrowers in taking out a mortgage is also likely to have an impact in the coming months.