Credit crunch comes home to roost as house prices fall £20k

The Edinburgh Solicitors Property Centre said prices had plunged 11 per cent in October compared to the same month last year. It is the third month in a row they have fallen, with the average city price dipping below 200,000 to 192,225 last month.

Meanwhile, analysts say homes are now taking around a month longer to sell, with the average property on the market for 100 days. Three-quarters of sellers are now accepting less than the asking price for fixed price properties.

Neil Harrison, marketing and planning manager at the ESPC, said he expected the fall in prices would continue well into the new year.

He said: "It's very much a buyers' market at the moment. There's certainly an excess of supply over demand. The natural consequence is prices will come down further.

"If you're downsizing, then the market is not working in your favour. But if you're moving up the ladder, then the property you're moving into will cost less.

"Our prediction is the market will be fairly subdued for most of 2009. But there are always unknowns, such as the interest rates and the city financial sector.

"We are not expecting any returns to price increases next year. In the course of next year, we expect the rate of decrease to slow down."

The ESPC figures show that only 24.5 per cent of properties being sold at a fixed price achieved the asking price.

Most buyers were taking advantage of the market to negotiate a better deal. The average premium paid on properties marked "offers over" was 13.8 per cent, down from more than 26.7 per cent last year.

The number of houses sold was less than half as many as in October 2007. Fewer than 400 sales were completed, compared to more than 900 the year before.

Scott Brown, a partner with Warners – a member of the Edinburgh and Lothians Property Group – said all types of property had fallen in value, although one-bedroom flats were affected less than larger properties.

He said: "First-time buyer properties are performing a bit better, as buyers do not need to sell their own property first. They're also becoming attractive for buy-to-lets, as rents are going up."

He said Warners sold 66 homes in the past six weeks, compared to 115 in the same period last year.

But he said: "There is a perception that nothing is selling at the moment, but that's not the case. If you are realistic about the asking price, then houses are still selling."