The average asking price of homes in England and Wales fell sharply in December, according to estate agents Rightmove...

Asking prices were down 3.2% from November with London, which suffered a 6.8% drop, the worst affected region. Rightmove said the decline was caused by people wanting to sell before the extension of home information packs on 14 December and seasonal weakness.

Recent indicators have suggested the housing market is cooling, with the Halifax recently reporting sale prices falling in each of the past three months.

HIPs hit home

Rightmove's own data has been volatile in recent months, with asking prices rising in October but falling in September and November. It said December's figure had been distorted by a disproportionate number of one- and two-bedroom properties coming on the market in the past few weeks. .

The seasonal trend of falling asking prices during December has been magnified by an unseasonal surge of cheaper than average 2 bedroom or fewer properties avoiding their 14^th December HIPs deadline.

Whilst this may bring some relief to estate agents who are normally devoid of new sellers just before Christmas, it brings further confusion at a sensitive time for the property market.

Home information Packs (HIPs) became mandatory for anyone selling such properties on 14 December, a deadline which experts had forecast would trigger a surge in sales by people wanting to avoid incurring the cost associated with them

West Midlands avoids the fall

According to Rightmove, every region saw prices fall this month except the West Midlands, where prices rose 1.7%. The average asking price dropped by more than £7,000 to £232,396.

December is traditionally a quiet month for the property market and asking prices have fallen this month in each of the past three years. But Rightmove said the extent of the slide reflected "genuinely tough market conditions".

"The substantial drops in asking prices are further confirmation of the underlying trend of more sellers re-adjusting their prices downwards to try and tempt buyers in deteriorating market conditions," said Rightmove's commercial director Miles Shipside.

House price inflation is expected to continue to slow next year as continuing credit and affordability restrictions dampen activity.

Mortgage market problems

Miles Shipside continues: “Traditionally, the Bank of England base rate is the most important factor in setting mortgage rates. In recent months, however, problems in the mortgage funding markets mean that the biggest influence has been the interest rate at which banks are prepared to lend to each other rather than that set by the Bank of England.

“There therefore needs to be an effort by all parties to act decisively. One way or another, we need a further 0.5% cut in the cost of credit to borrowers early in 2008 just to return market borrowing rates to where they were before the credit crisis.

“In addition, sellers need to price aggressively and banks need to get their own houses in order to improve liquidity as quickly as possible. We are in a different world compared to previous housing downturns. It is a world of international banking interdependencies, and a world in which the robustness of the UK housing market has never been tested”.