The average property asking price fell by its largest amount in almost two years in August, a study claimed yesterday.
Prices tumbled 1.6 per cent to £214,040 in August from £217,580 the previous month - the largest drop since November 2004 and the first since December, according to Rightmove.
The traditional seasonal slowdown has lead summer sellers to trim their prices with potential buyers away on holiday. The average time for houses to stay on the market climbed from 78 days to 81 days.
In contrast, average house prices rose by 2.9 per cent in July.
Rightmove says house prices are now unlikely to top this again this year, especially with the recent 0.25 per cent jump in the Bank of England base rate to 4.75 per cent.
Miles Shipside, commercial director of Rightmove, said: "Prices have passed their peak for 2006. The record price levels seen so far this year were driven by the south of the country. With that market cooling, and the signals from the Bank of England that interest rates may move up again, sellers may have to reduce their price expectations.
"This welcome dose of reality is good news for buyers, especially in the south of England, where many have been priced further out of the market by the strong growth during the first half of the year."
But he added that underlying demand for property remains strong.
Mr Shipside said: "Activity in the property market virtually stopped dead after two successive rate rises in 2004 and took a year to recover. Prices are now cooling off and require no further intervention from the Bank of England.
"With more realism from sellers, we could be entering a period of stability again."
The annual house price increase stood at nine per cent in August, down from 10.6 per cent in July.
