The ratio of homes to buyers has doubled in the past twelve months fuelling a slump in the value of housing.  Research by Rightmove revealed that the number of houses per buyer has risen to fifteen up from seven at this point last year.  This allows the buyers to be more discriminating in their choices and forces the owners to compete for each sale.

Miles Shipside, commercial director of Rightmove comments:

“Because of the mortgage famine, obviously fewer people are able to afford to buy, Sellers are now realizing they've got to compete more aggressively on price.”

"It is essential your property stands out over your competition, especially with a property to buyer ratio of 15 to 1. In spite of the lowest housing transactions for 30 years, new sellers had been coming to the market asking record prices. It was a mad state of affairs that defied the laws of economics. Thankfully, new sellers are now taking some proactive steps to price more realistically from the outset to attract increasingly hard-pressed buyers."

According to Rightmove's monthly housing price index, house prices have dropped 1.2% in late May to early June reducing annual price rises to just 0.1%.  This puts the average house price at £239,564, with the May to June decreases having shaved £3000 of the value of homes.

The biggest drop in house prices was in the southeast, where they dropped 2.4% to £303,828 in June. In the southwest they decreased 2.2% to an average £258,696. Prices fell 1.6% to £225,565 in East Anglia and 1.4% to £399,010 in Greater London.

These decreases were not mirrored in the north, west midlands or Wales, which actually saw asking prices rise in the period although these areas having seen larger declines in the longer term offset this.  Average asking prices are 3% lower in the West Midlands than they were a year ago, and 2.6% lower in Wales.

The current housing sales slump is being blamed on the increasing reluctance of lenders to offer low cost mortgages and a restriction on loans to high-risk borrowers. 

Mr Shipside said that tightening mortgage-lending criteria might mean that sellers have to cut ten per cent off their desired price if they want to attract "the half of buyers that can still buy".

Other industry officials have disagreed and blamed increasing consumer caution, particularly first-time buyers in the face of market insecurity.

The increasing slump in the buying market has not been reflected in the rental market though with Landlords rental incomes increasing 12% over the last year and 6% of the last 6 months.

John Heron, managing director of Paragon Mortgages, said: "Strong tenant demand has been pushing up rents, allowing landlords to achieve better yields than they've seen for more than two years. With lower property prices and higher rents, the yield they can achieve on a carefully selected and well-managed investment property can be significantly higher than other forms of investment. With an average portfolio gearing of just 36 per cent, landlords are well placed to free up equity to expand their portfolios."