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House prices continue downward spiral

House prices continued their downward spiral during September with the Government's stamp duty initiative appearing to have little impact on the market, figures showed today.

The average asking price for a home in England and Wales dropped by a further 1 per cent to £227,438 during the five weeks to 13 September, according to property website Rightmove.

But the slide was less than the falls recorded during each of the previous three months, and the annual rate of decline eased slightly to 3.3 per cent, compared with 4.8 per cent in August.

The figures are the first to be released covering the period after the Government announced its £1 billion package to help homeowners and buyers, including abolishing stamp duty on properties costing up to £175,000 for a year.

But the group said the initiative appeared to have had little impact on the market so far, adding that there had been an increase of only 0.5 per cent in the number of properties coming on to the market costing between the old threshold of £125,000 and the new one of £175,000.

However, it added that there had been a 5 per cent fall in the number of homes priced between £175,000 and £200,000, which may in part be due to sellers coming under pressure to cut their prices to be below the new level at which stamp duty kicks in.

Instead the group said there was little chance of a recovery in the housing market until the problems in the banking sector had abated.

Rightmove commercial director Miles Shipside said: "The housing market is on its knees and will remain so until financial institutions address the disastrous state of the mortgage funding markets.

"We are now seeing the lowest level of new sellers for years. There's a baseline level of activity from those that have to sell, but beyond that, discretionary sellers are increasingly scarce."

He said the current economic climate was deterring new sellers from entering the market, leading to the first fall in the average number of properties agents had on their books for seven months, with the level easing to 78 from 79.

The number of new listings estate agents received was also the lowest ever recorded by Rightmove for September.

Rightmove warned that with repossessions likely to rise going forward, the higher proportion of forced sales was likely to further increase downward pressure on prices.

It added that agents reported that many of the sales that were going through involved a homeowner who needed to sell, generally due to a death, divorce or debt, or because properties had been used as part-exchange.

London was the only area of the country not to record a house price fall during the period, with the average asking price in the capital soaring by 4 per cent during the month, although Rightmove cautioned that some of the gain was likely to be a correction following the previous month's fall of 5.3 per cent.

It added that asking prices in London had fallen by 1.5 per cent during the past quarter, in line with the downward trend across the rest of the country.

The East Midlands saw the steepest prices falls during the month, with asking prices in the region diving by 5.3 per cent, while in the South West they dropped by 3.9 per cent.

But the West Midlands, Wales and East Anglia saw lesser price falls of between 0.1 per cent and 0.4 per cent.

A spokesman for the Department of Communities and Local Government said: "When looking at trends in the market, it is important to remember that UK house prices are significantly higher than five years ago.

"The current issue affecting the market is largely about the supply of credit - a very different situation to the early 90s which was about high interest rates and unemployment. The fundamentals underpinning the market remain sound with long-term demand for housing, low interest rates, and low unemployment."