Hometrack has reported a slow start to the year with an extension of the seasonal slowdown and weak consumer confidence.
Both buyer registrations and sales have fallen and the underlying trend is one of tightening supply and weakening demand, Hometrack said.
Concerns over the economic outlook and Eurozone crisis have resulted in an 11% drop in demand over 2011 H2 and a 23% decline in buyers registering with agents between August and January.
The supply of homes for sale has contracted by 7% over the last 6 months. Supply has not contracted to this extent since 2009.
Nationally, house prices have not posted a month on month increase since June 2010 (18 months). In January prices remain unchanged.
A small rise in London prices offsets falls in other regions. A trend that looks set to continue through 2012 as the Olympics firmly focus the eyes of the world on London, and overseas buyers, in the midst of global uncertainty, continue to consider London a safe haven, Hometrack said.
On a regional basis southern England (excluding London) has seen the biggest decline in demand over the last six months, but this has been from a high base.
The average time on the market in the north and midlands stands at just under three months (11.9 weeks) – the same as 12 months ago. In southern England the time on the market is 9.1 weeks – the highest level for almost three years. In London the time on the market is 6.5 weeks, lower than the 6.9 weeks average at the start of 2011.
Hometrack said that given the pressure on household finances and the outlook for the wider economy, it expected only a “modest”” improvement in levels of demand in the coming months.