Hometrack’s latest monthly survey of over 5,100 agents and surveyors has highlighted a sizeable dip in housing demand as consumer confidence falters and the seasonal slowdown starts a month early.

The firm predicts house prices are set to remain under downward pressure in the near term but a tightening in supply means that by the end of 2011 prices are forecast to fall by -2%.

Demand for housing dropped by -4.3% in November – the fifth monthly fall in a row and the largest single monthly decline since January 2009.

This decline is largely seasonal but the scale of the fall has been exacerbated by weaker consumer sentiment fuelled by spending cuts and renewed concerns over the economy. All this at a time when expectations are that house prices are set to fall further.

The supply side dynamics of the market are set to change and this will influence the trajectory of prices over the next six to 12 months. As the outlook has become uncertain, so the supply of homes coming to the market has begun to fall. The number of properties for sale fell by -0.4% in November. This is the first time in nine months that the survey has registered a fall in supply.

A continued reduction in the supply of homes for sale seems inevitable in the coming months as vendors either reduce asking prices or withdraw property from the market. We expect this to act as a support to pricing levels over the second part of 2011.

Despite a decline in supply the weakness in demand continues to put downward pressure on prices. November registered the fifth consecutive monthly decline in house prices – down -0.8% compared to a -0.9% fall in October.

The extent of house price falls stabilised over November with prices down across 54% of the country compared to 56% in October.

Weakening market conditions have resulted in the average time on the market rising to 9.8 weeks – the highest level for 17 months since May 2009.

The proportion of the asking price being achieved has dropped to 92.4% the lowest level since September 2009.

Richard Donnell, director of research at Hometrack, said: “The seasonal slowdown in the housing market has kicked in a month early with demand for housing falling at the fastest rate for 20 months according to the latest housing market survey from Hometrack. This mirrors similarly weak data on levels of mortgage lending announced earlier this month.