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House prices fall 0.5%

Friday, 29 February 2008 12:00 AM

The latest data from Nationwide Building Society show house prices have plunged for the fourth consecutive month.

The average price of a UK home dropped by 0.5 per cent in February and comes following a dip of 0.3 per cent in January.

Nationwide revealed the annual rate of house price inflation was down to 2.7 per cent this month a low not experienced since November 2005.

The average price of a property in the UK is now at £179,358 which is an increase of £4,653 over the last year and shows prices have increased by an average of £12.75 per day over the last 12 months.

Nationwide said the prices were clearly weakening but admitted the annual rate between January and February overstated the rate of decline because it reflected the fact prices had soared strongly in February last year.

Fionnuala Earley, Nationwide's chief economist, said: "The softening in UK house prices in February is not unexpected given the weakening trend in other housing market demand indicators.

"House purchase approvals have been falling back sharply since the autumn and the upturn in interest from new home buyers at estate agents seen in the final two months of 2007 fell back again in January."

She added: "This reluctance on the part of buyers is not surprising given current economic uncertainties in the market and it is unlikely that we will see levels of activity returning to trend levels for some time."

Despite the continuing downward spiral in prices, Nationwide was keen to reassure the public that the market was not as gloomy as it might seem.

Meanwhile, Howard Archer, chief UK economist at Global Insight, said a combination of stretched affordability and tighter lending practices would drive prices down further. He has predicted a five per cent fall in prices this year.

"House buyers are being pressurised by elevated house prices, modest real disposable income growth and the significant overall rise in mortgage rates since August 2006," he said.

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