Nov. 19 (Bloomberg) -- U.K. home values dropped this month in every part of the country except London and sellers shouldn't hesitate to reduce prices further because a more protracted slowdown is on the way, Rightmove Plc said.

The average asking price dropped 0.7 percent to 239,986 pounds ($491,000) from October, Britain's most-used property Web site said in a statement today. From a year earlier, the cost of a home rose 7.9 percent, the least in 17 months. Rightmove conducted its survey from Oct. 7 to Nov. 10.

``If you have to sell, then seriously consider dropping your price and taking an offer now rather than holding out,'' Miles Shipside, commercial director at Rightmove, said in a statement. ``You could be offered even less in a few months. Prices are set to flat-line.''

Bank of England Governor Mervyn King said last week there are signs the property market looks ``particularly weak.'' Nationwide Building Society predicted Nov. 16 that house prices will stagnate next year for the first time in more than a decade after the central bank raised interest rates five times and banks tightened lending conditions.

In London, the only region of the 10 surveyed by Rightmove to register gains, prices increased 2.3 percent from a month earlier and 19.6 percent in the year, Rightmove said.

The U.K. price drop was led by a 2.4 percent decline in the West Midlands in central England, which includes Birmingham, the country's second-biggest city after London.

Crystal Ball

``When I get my crystal ball out, I see a quiet market over the next six months,'' said Stephen Smith, a director at real estate agents Fraser Wood Mayo & Pinson in Walsall, about 10 miles from Birmingham. ``Prices should be fairly flat, and some sellers are probably over-optimistic.''

Values in London have risen by about 20 percent over the past year as bankers poured bonus money into property and wealthy foreigners invested in luxury homes. Prices in the capital will probably only gain about 5 percent in 2008, Shipside predicted.

London bankers face bonus cuts of as much as 60 percent and job losses, employment lawyers said Nov. 14. Workers in the City, London's financial district, will invest only 2 billion pounds in homes next year, compared with 5.5 billion pounds in 2007, as they seek assets that offer higher returns, real estate agents Savills Plc said Nov. 5.

Barratt Developments Plc, the U.K.'s second-biggest house builder by volume, said today that 19-week sales slowed as cancellations increased and higher rates deterred buyers.

`Toxic' Conditions

The downturn in the property market may presage slower economic growth. Expansion will cool ``sharply'' in 2008, King said Nov. 14 when presenting the central bank's forecasts. Policy makers need to cut the key rate at least once next year, the predictions suggest.

U.K. house prices won't rise in 2008 after gaining 9.7 percent so far this year, Nationwide Building Society said Nov. 16. Citigroup Inc. said values may fall as the property market adjusts to a ``toxic mix'' of higher interest rates, overvaluation and record debt.

Properties are staying on the market for longer, today's report showed. The average was 92 days, the highest November reading since Rightmove started keeping track five years ago.

An index of house prices dropped to a two-year low last month, the Royal Institution of Chartered Surveyors said Nov. 13. HBOS Plc, the nation's biggest mortgage lender, and research company Hometrack Ltd. have also said prices are falling.

Housing Shortage

A housing shortage may limit a decline in values. Construction of new homes stagnated at 148,000 units a year on average between 1989 and 2005, down from a peak of 425,000 in 1968. The economy is also on course to grow at the fastest pace in three years in 2007, buoying demand for property.

``As long as we don't see the country go into recession or higher unemployment, then the shortage of supply over the longer term should underpin pricing,'' Shipside said in an interview.

Britons are shouldering the highest interest rates since 2001. The U.S. subprime mortgage slump has also prompted banks to lift mortgage rates, hurting affordability.

Mortgages with a fixed rate for two years, the most popular type in the U.K., cost an average 6.37 percent in interest last month, compared with 5.41 percent a year ago, Bank of England data showed on Nov. 9.

At 5.75 percent, the Bank of England benchmark interest rate is the highest among Group of Seven countries. Economists predict policy makers will lower the rate by February, according to the median forecast in a Bloomberg News survey from Nov 2.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

Last Updated: November 19, 2007 05:01 EST