The largest annual fall to be recorded by the Rightmove house price index came in October, with asking prices down 4.9% year-on-year. Although there was a small bounce of 1% this month, it was much smaller than in previous years and unlikely to last as buyers drive harder bargains going into the quieter winter season.

There is also a shortage of new sellers, and the report found some agents willing to overprice before the Christmas holidays. Similarly some vendors are pricing high in preparation for buyers’ bargaining tactics, another distorting factor for those watching the market.

Miles Shipside form Rightmove said: ‘Any potential buyer will drive a hard bargain, so the temptation for sellers to price up and negotiate later may seem like a good idea. These are not the tactics of sellers in real financial hardship, and it would appear that the economic downturn has yet to become an everyday reality to most people.

This is about to change as, unfortunately it looks like rising unemployment and an increasing pipeline of repossessions will drastically alter the complexion of the market in 2009.’

Other changes will be more long term, the report states, and include:

* First-Time Buyers having to save more for the larger deposits now required, thus
more likely to be older or the beneficiaries of help from their parents;
* Amateur buy-to-let investors becoming hindered by tightening criteria on mortgages
* Low volumes of new homes as the industry will take years to recover from banks’ wariness to lend on speculative developments, exacerbated by the loss of skills that the new homes developers have already suffered.