House price growth slowed to a standstill in June as demand fell back and supply continued to increase.
Demand fell by 0.5% for the first time in five months on growing uncertainty over the economic outlook and the impact of the Eurozone.
Some agents cited the weather and Jubilee bank holiday as contributing factors.
On the supply side, the volume of homes for sale continues to grow albeit at a slowing pace.
New supply grew by 1.5% in June, but for each of the last three months the growth in new supply has out-paced demand.
As we move into the summer months the traditional seasonal slowdown will ensure that demand remains subdued - the Olympics are only likely to contribute further to this.
As a consequence we expect the balance between supply and demand to widen with house prices set to come under renewed downward pressure over the second half of the year.
While headline prices remained static in June the survey reveals a shift in the balance of price changes between London and the rest of the country.
Price growth in London has remained steady at 0.3% for the last three months as supply remains tight and supports prices.
Across all other regions there is evidence of renewed price falls and slowing growth rates on weaker demand.
Prices were down across seven regions in June compared to just three regions in March.
Looking at price trends within regions, the survey shows that house prices were down across 23% of the country in June.
This is almost double the level of price falls recorded over each of the last two months – see figure 4.
The increase in the extent of price falls has been seen largely in southern regions outside London where prices are softening off a high base on weaker demand and growing uncertainty.
In March just 10% of the south east registered price falls but this has now grown to 26%.
In the south west the proportion has grown from 2% to 32% over the same period, while the change has been 11% to 30% in East Anglia.
The softening in prices in southern England is starting to feed through to the length of time a property remains on the market and the proportion of the asking price achieved.
The time on the market in southern regions has risen to 8.4 weeks up from eight weeks in April.
The proportion of the asking price achieved is also starting to fall as sellers are increasingly prepared to take a larger hit on asking prices to ensure a sale.
Richard Donnell, director of research at Hometrack, said: “In contrast to the midlands and northern regions, there is more scope for price falls to be absorbed by vendors in the south.
“As yet there is little evidence of any signs of a slowdown in London overall - supply remains tight and demand is holding up.
“However, the London housing market is not immune from weaker demand, either domestic or international.
“Changes to stamp duty rates announced in the budget and other proposals such as a charge on high value property are bound to have an impact on buyers.
“Indeed the Central London and City area covered by the survey has seen growth under-perform the rest of the market for the last two months.
“Overall we expect uncertainty and weaker demand to result in prices slipping by 1-2% over the next six months as prices soften in higher value areas in southern England.”
Hometrack said the market continues to remain fragile in the regions away from southern England where economic growth is more subdued and the balance between supply and demand is less pronounced.
Donnell added: “Despite weaker demand, low interest rates and an ongoing scarcity of housing for sale continue to act as a major support to overall pricing levels.
“However as consumers are showing, the greatest risks in the short term stem from the problems in the Eurozone.”
