After a red hot start to 2006, the housing market is set for a cooler period as confidence slipped for the first time in six months, according to research from a property portal.

The prediction comes as cash-strapped first-time buyers try to drive a hard bargain and property investors make their lowest offers. Buyer enthusiasm is cooling far faster than sellers’, said the report - signifying a slower market to come.

On average, house hunters have slashed their expectations for property prices over the next year from 7.7% in May to 4.3% in June, according to the report from Propertyfinder.com.

Over three-quarters (78%) of respondents expect the market to rise over the next twelve months, still a healthy proportion, but down from the 84% seen in May. This is the first such drop since December, said the report.

Buyers pitch their offers low

While asking prices may have been rising all year, buyers have begun to respond by demanding bigger discounts when making offers – an average of 6.1% below the asking price during June compared to 0.7% in March. See figure 1 below.

This is the lowest point in over 9 months. Those buying property for investment purposes are the toughest as they are driven by investment returns, not the emotional considerations of owner-occupiers.

Investors are making offers averaging 10% below the asking price. First time buyers are also driving a hard bargain offering 6.3% below the asking price, perhaps because they have the tightest budgets. Those who are moving home are more generous, offering on average 4% below the asking price.

Warren Bright, chief executive officer of propertyfinder.com said: "Buyers are clearly backing away from high asking prices. At the peak of the recent mini-boom, they were prepared to pay almost the full price, but the picture has changed rapidly."

"These figures show that asking prices are not a reliable guide of where the market is heading. As market conditions change, the prices actually paid can diverge significantly."

Buyers are trimming their optimism on the market more sharply than sellers are. This is a major indication of cooler market conditions to come. Back in May, buyers were significantly more optimistic than sellers which indicated a tight market as buyers were prepared to chase prices upwards. This has changed in June with the two groups much more closely aligned, suggesting a more balanced market.

"Fears over interest rates and stock market volatility may explain much of the cooling, but the World Cup effect should not be underestimated. The number of people looking for property on propertyfinder.com fell 35% during the latest England game,"Bright added.