House prices could plummet by £21,000 in a bid to beat 'Brickor Mortis'

The average asking price is now running at £229,816 - down by around £5,000 on last month and some £12,700 on the peak seen in May last year.

Experts at Rightmove suggest prices in London have fallen off a cliff.

The number of house sales in 2008 could fall to the lowest level since 1959

They report that the average asking price in the capital is down by just over £21,000 in August versus July - at £379,162.

Rightmove says the market has been gripped by Brickor Mortis caused by the combination of a mortgage drought and government dithering over changes to stamp duty.

It believes the number of house sales in 2008 could fall to the lowest level since 1959.

Ministers have hinted at some kind of temporary stamp duty holiday in order to breathe life into the market, however any announcement has been put off until October.

Consequently, many buyers have deserted the market until the situation has become clear.

Rightmove spokesman, Miles Shipside, said: 'Sellers coming to the market in the middle of the summer holiday season tend to be more motivated.

'London, in particular, appears to be having its own special summer sale with over £21,000 off in a month.'

In spite of London’s large monthly fall, it is still playing catch-up with the rest of the country.

Prices in the capital are 3.8per cent lower than last year, compared with 4.8per cent lower nationally.

Rightmove said the number of unsold properties on agents' books is running at 78.

Mr Shipside said: 'The number of transactions this year is in danger of being the lowest since 1959.

'This raises serious questions as to whether any short-term incentives by individual UK entities, such as the Government or the Bank of England, would be effective in speeding up the market recovery against the backdrop of the global problems of the credit crunch.'

Prime Minister Gordon Brown is due to make an announcement on a proposed stamp duty 'holiday' in October

Mr Shipside said: 'Clarity as to whether a stamp duty holiday is in the offing is urgently required as hard won sales are falling through.

'Any initiative must be accompanied by a clear strategy as to how to bring the holiday to an end without causing excessive market disruption.'

He said the shortage of mortgages is a far bigger factor than the cost of meeting Stamp Duty in paralysing the market.

The Bank of England tried to alleviate the lending paralysis earlier this year by pouring £50 billion into the UK banking sector by swapping UK mortgage loans for gold-plated Government bonds.

These bonds can be used as collateral to raise money to fund financial products, such as mortgages.

The Chancellor, Alistair Darling, backed the move on the basis that the banks would respond by relaxing their clampdown on lending.

However, there is little sign they are fulfilling their part of the bargain.   

Mr Shipside said: 'The lack of mortgage finance is central to the problem, and perhaps that is where policymakers’ attention should be focused, as the banks can’t or won’t sort out the mess they were instrumental in creating.

'In the meantime, sellers need to continue to price to sell, present their homes to be the best on the street, and promote them better than the rest to really stand out.'

Rightmove, an estate agents' website, reports that asking prices in August are down in every region of England and Wales except for the East Midlands.

The fall in Greater London is put at 5.3per cent, it is 3.2per cent in East Anglia, 3.3per cent in the North West, 2per cent in the West Midlands, 1.7per cent in Wales, 1.6per cent in the South East.

The fall is put at 1.1per cent in Yorkshire & Humberside, 0.9per cent in the North and 0.4per cent in the South West. The East Midlands showed an increase of 1.6per cent.