Demand for housing dropped 1.3% in July, the first dip in 15 months according to the latest report from Hometrack, while house prices dropped by 0.1%. The survey of over 5,000 agents and surveyors also identified a downwards trend for the market over the past five months.

In contrast, the supply of properties for sale has risen – by 3.6 in July as the abolition of HIPs and firmer pricing encouraged vendors to come to market.

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Richard Donnell Director of Research at 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 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.

‘The fall in prices marks a turning point for the housing market following 12 months characterised by a lack of homes for sale and resurgence in demand, primarily for family housing in southern England. 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 dissipated.’

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