House prices fell for the eighth month in a row in May according to the latest national housing market survey from Hometrack, the Housing Intelligence Business.

Average asking prices were down by 0.5% over the month, following a 0.6% fall in the previous month. On a year on year basis the annual rate of growth fell to -1.9%, from -0.9%, the lowest level since November 2005 (-2.3%).

The latest Hometrack survey highlights the ongoing reluctance of households to commit to the market in the face of continued uncertainty. “What we referred to last month as the ‘buyer’s strike’ continues with a 6.7% drop in the number of buyers registering with agents over May, following a 2.8% fall over the previous month,” comments Richard Donnell, Hometrack’s Director of Research. While the volume of people registering with agents falls, the supply of housing for sale continues to rise - over 7% in the last 2 months and 20% since February.

This growing mis-match between supply and demand, particularly over the last two months, explains why the extent of price falls has increased compared to earlier in the year, with 53% of postcodes registering lower prices over May compared to April. Despite this, the actual fall in headline prices was lower in May (-0.5%) than April (-0.6%) which was reflected in all but one region - the South West where the monthly price fall increased from -0.6% to -0.7%.

“It is too early to say whether the level of monthly falls will now start to moderate as this will require an improvement in demand and sales agreed which are both linked to overall buyer confidence. The current trends in the survey indicate that pricing looks set to remain under downward pressure over the coming months,” comments Mr Donnell.

The scale of the downward pressure on prices is highlighted by the proportion of the asking price being achieved - this has slipped from 93% to 92.3% over the last month and is now at the lowest level since the survey began in 2001. Looking back over the last year the proportion of the asking price being achieved has declined the most in London from 97.1% to 91.9%, with the South West and South East also registering some of the greatest downward pressure on asking prices.

The latest survey also shows an increase in the time taken to sell a property which now stands at 9.8 weeks, up three weeks from 5.8 weeks in May 2007.

Mr Donnell continued, “Improved buyer confidence is the key to any stabilisation in pricing levels although there is also likely to be a growing number of households over the coming months who need to move.” He adds, “The 20% increase in property for sale since February does indicate that there are households looking to transact. The implication for prices in the short term largely depends on the split between those who ‘have to sell within a certain period of time’ versus those ‘looking to sell at the right price’ which is unknown. The former group of sellers will need to be more realistic on the achievable price compared to the latter group.”

“In order to get sizable price falls a large majority of transactions need to be ‘forced’ sales which are mostly prevalent in periods of rising unemployment and recession. The fall in buyer confidence over the last six months has certainly impacted on transaction volumes but we do not believe that this is a precursor to a major rise in forced sales and large price falls. It seems likely that in that short term prices will continue to edge down until they reach a level where buyers are prepared to commit.”