August house price fall

House prices fell for the fifth time in the last 12 months in August, new figures show.

The latest Nationwide house price index reveals that prices fell by 0.2 per cent in August following a 0.2 per cent rise in July.

Annual house price growth is still at a nine-year low. Having fallen to 2.6 per cent in July, house prices in August were just 2.3 per cent higher than the same month last year – the lowest rate since May 1996.

Taken together, the combined rise in house prices over the last four months would be equivalent to just a quarter of a per cent a year should it continue, Nationwide says.

The price of the average property has dropped to £157,310, from £158,348 in July, but there are still no signs of rapid falls.

Fionnuala Earley, Nationwide's group economist said: "The housing market has remained quite resilient this year following last year's interest rate hikes. Price inflation has slowed gradually, but is still positive, and activity has been creeping up since the end of 2004."

She said consumer expectations of a controlled slowdown were now feeding into the market and tempering expectations on house prices.

"This, along with the cut in interest rates, has made it more of a buyers' market which has led to increased numbers of buyer enquiries and increased optimism about sales from estate agents," she added.

But despite this optimism, helped by the recent interest rate cut, it would be some time before the market took off again.

She said: "Even though wage inflation is almost twice the rate of house price inflation, affordability is still an issue, particularly for first-time buyers, and it will take some time for the balance to be redressed."