Asking prices dropped this month by 0.1%, the 3rd successive monthly fall said Rightmove today. Prices have now fallen in 5 out of the last 6 months, as market continues to adjust after the boom.

But the choice of available property remains high, up 30% on this time last year and Rightmove says the number of people looking for properties on the internet (‘window shopping’) outstrips this time last year by 66%. The firm says this may be an early indication that confidence is returning and the market coming out of the doldrums.

The first housing market data from the New Year shows 2005 beginning with a further monthly decline in asking prices, which fell by 0.1%, from £189,733 to £189,509. This is the third consecutive monthly reduction in asking prices. Prices have declined in 5 out of the last 6 months, and have dropped by 3.4% or almost £6,700 since the peak of £196,198 recorded in July as the market re-adjusts after the peak of the boom.

At a traditionally quiet time of the year, less than half as many properties came onto the market during the 4 weeks to 8th January as compared with the previous 4-week period (to 11th December).

While few sellers are putting their homes up for sale, sales also remain slow. Time on market continues to rise, reaching 87 days, up from 53 days in the summer. Estate agents’ stock levels remain high, although they have declined slightly since December, falling from 67 properties to 64 properties – reflecting the fact that some homes for sale have been withdrawn from the market.

However, there could be early signals that buyers feel that prices in some areas have been reduced by enough to tempt them back in. This is evidenced by a clear increase in the number of searches for properties displayed on the internet. This may be an early indicator that pent-up demand for homes remains strong and that buying activity will pick up once people are satisfied that prices have become more affordable and confidence returns.

Miles Shipside, commercial director of Rightmove, comments: “This month’s small fall in prices appears to continue the trend seen in the second half of 2004, when the housing market began to respond to increased borrowing costs and the growing belief that property prices had become just too high."

"However, December and January are always quiet months as people’s attention is more focused on Christmas and the New Year sales than on buying and selling houses. Asking prices have fallen in January in each of the last 3 years, and January doesn’t necessarily set the tone for the spring. Last January’s 0.1% fall was followed by 5 months during which prices surged by 13.5%, an increase of well over 2% every month. The background is very different this year, however, with four interest rate rises in 2004 for buyers to cope with.”

“On the other hand, there is growing evidence that in some towns and cities estate agents and sellers are taking the bull by the horns and recognising that sensible pricing is the only way forward, taking account of the new market reality."

"Properties marketed at the right price are attracting buyer interest and are being sold, while those which are being offered at last year’s ‘boom prices’ – often on the same street – are being passed by. In these areas, a two-tier market is beginning to emerge.”

“Some estate agents appear to be still over-valuing relative to market conditions, possibly to attract more new instructions in a quiet month. This would explain the geographically very patchy figures, which are consistent with the market re-adjusting at different rates in different towns and regions after a boom."

"It could take 6 months for estate agents and sellers to change the boom pricing mindset of the last 5 years. Some estate agents started to change 6 months ago and so are now selling again. Others who have reacted too late have large stocks of over-priced properties and face some desperate months ahead. We are seeing some estate agents go out of business and more will follow as the pick-up in activity will come too late.”