The latest monthly survey from the property website Rightmove says the number of unsold properties has reached record levels as the market grinds to a halt. The report says the average asking price in England and Wales has dropped to £235,219, down from £239,564 in June. That was the second monthly fall in succession after a drop of £3,000 in June.

Rather than selling in a poor market, aproperty owner has decided to let her two-bedroom flat in west London, and jump feet-first into the rental market herself.

Like others, she wanted to keep her stake in the London market. If her rural idyll didn’t work out she could return to the capital, or if prices started to rise she could sell. “But I love it here,” she says. “Last week I joined in the village croquet tournament, and people are so kind and friendly.” Her son Alexander is 18 and just about to go to university, so she feels she can do what she wants. “I only wish I had done it earlier. I think when the market recovers I will sell and buy something up here.”

Householders in England and Wales had to reduce the cost of their home by nearly £3,000 during the five weeks to 14 June, with the average price tag on a property now at £239,564.

The fall – the first recorded during the peak month of June by Rightmove – followed a 1.2 per cent house price rise the previous month, and suggested that homeowners in the south of England were being worst hit by the stagnating market.

According to the website’s commercial director, Miles Shipside, future sellers can expect to knock 10 per cent off what their house was worth at the height of the property boom. He added: “In spite of the lowest housing transactions for 30 years, new sellers had been coming to the market asking for record prices. It was a mad state of affairs that defied the laws of economics. Thankfully, new sellers are now taking some proactive steps to price more realistically.”

The ration of properties on the market to buyers has doubled to 15-to-one in a year, forcing homeowners to slash prices.

On average there are now a record 75 unsold properties on the books of every estate agent in the country.

The report warns “run-of-the-mill” properties are being particularly badly hit and semi-detached homes in commuter towns need to be marketed as rock bottom “bargain buys” to stand any hope of selling.

The average price of houses and apartments costing more than 2 million pounds ($3.9 million) fell 1.5 percent in May from a month earlier, Knight Frank said today in a statement. That cut the annual increase to 13 percent, down from a peak of 38 percent in August.

“With the mortgage market in growing difficulties, the weakness seen across the wider U.K. market is now spreading to the prime London market,” Liam Bailey, Knight Frank’s head of residential research, said in the statement.

The prime-property market for central London has weakened “notably” in the past two months, Knight Frank said, and prices will probably fall at least 5 percent this year. Tighter lending restrictions and the prospect of the worst job cuts in London’s main financial district since 2001 deterred some potential buyers of luxury homes.

“Purchasers are struggling to access finance at the current time and, combined with weaker sentiment, this has led to a slump in sales,” Bailey said. Sales in April and May were almost 50 percent lower than the same period a year ago, he said.

Super-Prime Growth

Sales of properties costing more than 10 million pounds, known as “super-prime,” are 40 percent higher than a year ago, Knight Frank said.

“The super-prime market is the only true hot spot,” said Bailey. “This market is not immune from a downturn, but its support from international buyers, who are in part funded by oil and other commodity wealth, means the prospects for super prime are still strong.”

The super-prime market is still growing, Jim Ward, head of residential research at Savills Plc, said at a presentation in London today. “Many of the buyers are financed by margins from commodities. There’s some further growth potential within that market.”

The most expensive address in Britain is Courtenay Avenue in the Highgate neighborhood of north London, where prices average 6.8 million pounds, according to the Mouseprice Web site.

London properties priced from £5 million will not experience the house price falls being noted across the country, according Knight Frank.

According to US investment bank Citigroup, house prices could fall by as much as 15 per cent by the end of the year as sellers struggle to find buyers amid worsening economic conditions.

However, according to Liam Bailey, head of residential research at Knight Frank, London properties in the price range of £5 million and £10 million will still be in demand since they typically attract international buyers from countries whose economies have remained unaffected by the downturn.

He said: “When you go above £5 million, it becomes very much an international market - the people who are buying are overseas buyers.

“They are generally coming from countries like Russia, Ukraine, Kazakhstan, the Middle East and the Far East, and they are bringing with them wealth from economic sectors that are untouched by the credit crunch, such as oil, gas, commodities and so forth.”

He added: “They are still buying and they are buying more now than they were last year. It is very healthy at the moment. I would have said it couldn’t go on outperforming until the last five months proved that it can

When that happens he will face a huge challenge, as mayor, he will be in charge of everything from transport to the policing of London as well as the city’s economic development.

The mayor’s policies are implemented by the government of London, the Greater London Authority, and its four bodies - Transport for London (TfL), the Metropolitan Police Authority (MPA), the London Fire and Emergency Planning Authority (LFEPA) and the London Development Agency (LDA).

First of all Mayor Johnson will have to draw up his own team at City Hall. Then when he sits down at his desk what policies will be top of his in-tray?

Buses became a big part of Mr Johnson’s election campaign.

Once he is in charge he can carry out his promise to phase out the bendy bus, which he claims is dangerous and unsuitable for London’s streets, and run a new competition to find a 21st Century version of the Routemaster bus.

He also wants to put more police on buses, especially in outer parts of the city and introduce live bus mapping, where passengers can monitor the progress of their bus in real time on the phone or online.

Once installed at City Hall, Mr Johnson will be able to start his plans to reform the congestion charge, another high profile part of his election campaign.

He has criticised his predecessor Ken Livingstone’s plan to introduce a £25 levy for the worst-polluting vehicles.

Instead, he has said, he wants to re-consult on the western expansion of the congestion charge zone and make paying the charge easier by allowing people to do it on a monthly basis.

Mr Johnson wants more police on trains and stations and is keen to improve river transport in the capital.

He plans to lobby for powers to fine utility firms for roadwork delays and rephase the city’s traffic lights saying it will make vehicles run more smoothly.

As far as air travel is concerned, Mr Livingstone has opposed any airport expansion in London.

Mr Johnson says he is opposed to expansion at Heathrow describing it as “a planning error of the 1960s”, but he has talked about a possible new airport in the Thames estuary.

Mr Johnson has said he will negotiate a no-strike deal with the tube unions, under which pay deals will be put out to an independent arbiter.

Tackling street crime, particularly knife crime and gang violence, was Mr Johnson’s biggest election campaign issue.

Mr Livingstone said if he was re-elected he would reduce crime by 6% a year.

Mr Johnson wants to move away from a target-driven approach and has pledged to provide 50 more British transport police officers and 440 extra police support officers.

He also wants give more powers to community support officers to strengthen neighbourhood policing as well as reduce police bureaucracy.

After signing the declaration as mayor on Saturday, Mr Johnson said again how he wanted to increase the number of affordable homes in London by 50,000 by 2011.

In his manifesto, Mr Livingstone wanted to go further and make 50% of new homes affordable, with a minimum of 50,000 in the next three years.

Mr Johnson will also have to live up to his promise to develop more family homes and protect back gardens from development.

He also wants to invest millions of pounds in renovating more than 80,000 empty properties in the capital to get low-income people off housing waiting lists.

Mr Johnson will be in charge of London in the run up to it hosting the Olympic events and games.

He says he wants to ensure that the 2012 Olympics legacy lasts for decades not just the three weeks of the actual event by creating improved transport links, world-class sports facilities, entertainment and many new jobs.

He has also said he will make sure that no more London taxpayers’ money is spent on the Olympics than is currently budgeted for

The price of an average home dropped 1 percent to 178,555 pounds ($352,000), said Britain’s fourth-biggest mortgage lender. Its index is one of the measures used by the Bank of England when assessing the housing market. From March, prices fell 1.1 percent, double the pace economists had forecast.

Mortgage lenders approved the fewest new loans since at least 1999 last month after turmoil in credit markets prompted banks to tighten standards for borrowers. While the Bank of England has cut interest rates to stave off a recession, policy maker David Blanchflower said house prices may fall by a third, and a separate report today showed consumer confidence fell to the lowest since 1992.

“We’ve been expecting some moderate fall in house prices this year, and that’s only to be expected since we’re seeing deteriorating affordability and tighter credit market conditions,” Nationwide Chief Economist Fionnuala Earley said in a Bloomberg Television interview. She forecasts that prices may decline as much as 5 percent this year.

Market Reaction

The pound, which fell 0.3 percent to 79.47 pence per euro immediately after the report, later erased those declines and was at 78.56 pence at 5:24 p.m. in London. Against the dollar, the British currency rose more than a penny to $1.983.

Chief Secretary to the Treasury Yvette Cooper said house prices will remain under pressure even if the economy continues to grow. She pledged more work to restart mortgage markets.

“No matter how strong the long term fundamentals, the housing market will face pressures while the credit squeeze continues,” Cooper said in a speech in London today.

Blanchflower late yesterday urged his colleagues on the Monetary Policy Committee to take “aggressive action” on rates.

“Monetary policy, in my view, still remains restrictive currently, and we need to take action to loosen policy sooner rather than later,” said Blanchflower in Edinburgh. The nine- member MPC next decides on rates on May 8.

Britain’s central bank this month cut its benchmark rate by a quarter point to 5 percent, the third reduction since December. That’s still the highest among the Group of Seven nations.

Further Evidence

Nationwide’s report is the latest to suggest a downturn in the U.K. housing market is worsening. HBOS Plc, the country’s largest mortgage lender, said this month that prices fell in March by the most since 1992. The Bank of England, which was forced to bail out mortgage lender Northern Rock Plc last year, said yesterday that home-loan approvals dropped to 64,000 last month, the lowest since records began in 1999.

“If someone needs to sell they can still sell, it’s just that they’ll have to take on board a price reduction,” said Stephen Ludlow, director of real-estate agent LudlowThompson, which has 10 branches across London. “The price reduction could be somewhere round about five percent, maybe as much as 10 percent.”

Property-related stocks have plunged since credit markets seized up in August. Bradford & Bingley Plc, the U.K.’s biggest lender to landlords, has dropped 60 percent; shares of HBOS and Persimmon Plc, the U.K.’s largest homebuilder by market value, have both dropped around 50 percent.

Boom Finishes

The end of Britain’s decade-long property boom may hurt consumer spending and drag down economic growth this year. The economy expanded at its slowest pace in three years in the first quarter, and GfK NOP Ltd. said today that consumer confidence fell to the lowest in 16 years in April after the property slowdown and higher oil prices dented households’ spending power.

“There are quite a lot of strong headwinds against consumer spending,” said Jeavon Lolay, an economist at Lloyds TSB Group Plc in London. “We’ve seen the best economic growth already for the year in the first quarter, and it will weaken from here.”

Nigel Lawson, who served as finance minister from 1983 to 1989, said on April 9 that Britain is headed for a “prolonged” recession. Chancellor of the Exchequer Alistair Darling forecasts growth of at least 1.75 percent this year, down from 3 percent in 2007.

The global credit squeeze, which is almost nine months old, is putting further pressure on the housing market. The Bank of England on April 21 offered to swap government bonds for mortgage-backed securities. Darling is encouraging lenders to offer more generous mortgage deals to consumers.

The swap “should introduce some more stability and reduce volatility in the financial markets,” Earley said. “In terms of turning the housing market around and returning to positive rates of growth in next few months, that’s very unlikely.”

To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net

As a result, true loan-to-value (LTV) ratios are often higher than is usually thought, which, in turn, could lead to a big jump in mortgage defaults this year, says Mark Witherspoon, the company’s chief executive. The problem is, he says, that many lenders price the risk of lending on a property in ignorance of other charges that may be on it. So if a bank lends 75% of a property’s value, the homeowner may then take additional secured loans with other lenders and therefore face a true LTV of, say, 110%, making him or her much more likely to default.

“The loan will behave like a 110% loan because the borrower knows his true level of debt. He will read about slowing house prices and is much more likely to default on the mortgage payments than Mr 75%,” said Witherspoon, a former head of the property research firm Hometrack. “Until all lenders start to record 2nd, 3rd and 4th charges properly, this will be a major hidden risk in the UK mortgage market.”

UKValuation has been commissioned by a group of mortgage lenders to try to establish the “true” LTVs on the properties they have lent against in recent years.

Particularly vulnerable, says Witherspoon, could be people who have bought flats on a high LTV in the past couple of years. Flat prices have performed much less strongly than, for example, detached houses and are now falling.

Some economists and the International Monetary Fund believe that British house prices are overvalued by as much as 30% and could fall sharply