The downward pressure on house prices will continue next year as the imbalance in supply and demand results in property prices falling 2% by the end of 2011, forecasts suggest.
Hometrack says after a rise in supply over the last six months and continuing weak demand will force vendors to cut their asking prices or withdraw property from the market.
Demand for housing fell 4.3% in November, the fifth consecutive monthly fall and the largest drop since January 2009, amid consumer concern over government spending cuts and the economy.
But Hometrak says the supply/demand balance will change in the coming months, as supply begins to drop back.
Hometrack recorded the first fall in supply for nine months in November, down 0.4%, which it says was linked to weakening demand as most buyers are also would-be sellers.
Richard Donnell, director of research at Hometrack, says falling supply will come from estate agents attempting to adjust stock levels to realistic prices more closely aligned to demand.
"The reality is in the months ahead vendors will either need to reduce prices or withdraw property from the market," he says.
He expects the process to run over the next three to six months, resulting in a gradual tightening of supply which will act as a support to prices over the course of 2011.
In the near term, Donnell says demand will remain weak and this will continue to put downward pressure on prices in the coming months.
"Over the course of 2011 we expect average house prices to decline by -2%," he says.
House prices fell 0.8% in October, according to Hometrack, compared to a drop of 0.9% in October. The proportion of asking prices being achieved fell to 92.4%, the lowest level since September 2009.
Nevertheless, the extent of house price falls stabilised in November, with prices down across 54% of the country, compared to 56% in October.
The average time to market has risen to 9.8 weeks, its highest level for 17 months, while the time on the market is over three months in Wales, the East Midlands and North West.
Donnell says the seasonal slowdown in the housing market has kicked in a month early, with demand for housing falling at the fastest rate for 20 months.
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