House prices fell for the seventh consecutive month, with an average monthly decline of 0.6 per cent following a 0.2 per cent price drop in March. On an annual basis, property prices fell 0.9 per cent despite having risen 0.4 per cent year-on-year in March. This represents the first annual decline since February 2006 and the most lacklustre performance since January 2006, when prices dropped one per cent.

Director of research at Hometrack, Richard Donnell, said: “While the availability of finance is impacting on demand in certain segments, the reality is that weak confidence is effectively resulting in a buyers strike with households sitting on the sidelines and waiting to see how events unfold.

“As we predicted last year, transaction volumes will be the big casualty and there now seems the prospect of a record low in residential sales volumes in 2008.”

According to Hometrack, tighter lending conditions in the mortgage market and the impact of the credit crisis spell the difference between declining house prices and the decline seen at the end of 2004. The US sub-prime mortgage fiasco and a series of Bank of England interest rate hikes have contributed to a slowdown in the property and mortgage sector, it said.

And, despite recent base rate cuts from the Bank of England, many mortgage lenders have refused to cut rates; indeed, many have actually increased prices in recent weeks. Meanwhile, the average length of time taken to sell a property has increased from and 8.5 weeks in March 2008 to 9.1 weeks in April and from six weeks in April 2007.

Mr Donnell added: “The current downward pressure on prices will only start to be reversed once there is a turnaround in buyer confidence, the timing of which, is almost impossible to predict but will revolve around greater stability in the financial markets and an improved economic outlook.”

©Fair Investment Company Ltd