House prices fell during the second week of June, according to property website Rightmove, who say this first fall in house prices this year is clear evidence of the long expected slowdown in the housing market.

This month’s index may show the first clear evidence of the long-expected slowdown in the housing market, say Rightmove in their monthly report released yesterday.

Asking prices continued their strong upward trend in the first 4 weeks of the 5-week period covered by the report – but showed a marked downturn in the final week.

While one week of declining asking prices does not reliably predict the future trend of prices, this may be the first factual indication that four interest rate rises are beginning to bite.

As Rightmove reports asking prices of properties just coming onto the market (i.e. much earlier than other house price indicators) this may be a leading signal of the gradually slowing market, to be confirmed (or otherwise) by subsequent Rightmove house price data and by statistics published by mortgage lenders.

Prices fell in the final week in 5 out of 10 regions – led in particular by Greater London (down 1.6%) and the South East (down 0.7%). There was also some easing of prices in other parts of the country, with Wales down 1.3%, the North West down 0.3% and the West Midlands down 0.2%.

Over the (5-week) month, however, national asking prices are 2.6% up in June as compared with May, increasing from £188,962 to £193,965 – a rise of just over £5,000.

From the post-Christmas dip of £168,866 to the peak of £194,648 in early June, asking prices have risen by over 15% in 2004, or almost £26,000. The return of purchasers to the market, encouraged by low interest rates and good levels of consumer confidence, combined with a shortage of properties for sale, has pushed prices up strongly from January to May this year.

The slight correction in prices seen in June occurs at a time when stock levels at Rightmove’s member estate agents are on the increase. As indicated above, low levels of property for sale at a time of a resurgence in buyer activity were responsible for sharply rising prices in first 5 months of 2004. However, the average number of homes for sale per estate agent office has steadily grown since the New Year, with stock levels now standing at around 54 properties per branch, over 10% more than January’s figure of 49.

This gradual increase in estate agents’ stock levels, partly underpinned by rises in borrowing costs and affordability constraints at current prices, is contributing to an orderly slowdown in the market.

Notwithstanding the easing of prices in the final week, annual house price inflation has risen again this month, from 15.6% last month to 17.2% this month. This compares with latest figures of 19.5% and 20.4% from Nationwide and Halifax respectively, reflecting their skew towards the lower, more buoyant end of the market.