Commenting on the latest monthly house price index results from Hometrack

Richard Donnell director of research, Hometrack, said: “Levels of demand for housing have been slowing for the last five months - in July they fell by 1.3% triggering the first monthly fall in house prices for 15 months. Prices moved lower by just 0.1% with the year on year rate of growth slowing to 2%. Further modest price falls are inevitable over the second half of the year as the volume of homes for sale continues to rise and demand remains weak on the back of concerns over the wider economic outlook and uncertainty over the impact of recently announced cuts in government spending.”

This modest fall in prices could mark a turning point for the housing market following a 12 month period characterised by a relative lack of homes for sale and resurgence in buying demand, primarily for family housing in southern England.

Donnell said: “Equity rich, cash buyers, keen to move but hindered by a lack of supply, have driven up prices and sustained what essentially became a ‘one dimensional’ market. But in recent months, much of the pent-up demand which stretched back to mid 2009, has now either been satisfied or has dissipated.

“It is hard to identify factors that will drive any marked increase in demand for housing in the coming months. This is important as a sustainable housing market is one where the dynamics of supply and demand remain essentially in balance. Any changes in demand will have a marked impact on short term movements in house prices.

“In sharp contrast to last year, the market has also witnessed a continued increase in the supply of homes for sale. The last two months has seen an acceleration in the volume of property coming onto agents books.”