First UK house price fall in 10 months
House prices in the UK fell for the first time in 10 months during February as the market was hit by winter weather and the end of the stamp duty holiday, figures showed today.
The 1% slide reported by Nationwide building society did not come as a surprise, as other indexes had pointed to a drop in activity during the early part of the year.
But the fall, which ended nine consecutive months of price rises, fuelled speculation that the housing market recovery is running out of steam, with many economists expecting house prices to resume their downward trend this year.
Martin Gahbauer, Nationwide's chief economist, said: "There is evidence from a range of indicators that the market may have lost momentum in early 2010 as the stamp duty holiday ended and house hunters were obstructed by the icy weather.
"This drop in demand seems to have fed into agreed prices during February.
"At this stage, it is difficult to gauge how much of the drop in housing activity is attributable to one-off factors and therefore whether February's fall in prices is just a temporary blip or the start of a new trend."
The UK Land Registry also released figures today showing that the housing market remained robust during January, with prices in England and Wales rising for the eighth consecutive month, increasing by 2.1%.
The gain pushed the average cost of a home up to £165,088 (€184,899), the highest level since September 2008, while annual house-price growth rose to 5.2%, the second consecutive month during which it has been positive.
However, the Land Registry index, which is based on property completions, tends to lag other house price measures by around three months.
The fall to the Nationwide index comes after the Royal Institution of Chartered Surveyors reported a steep drop in activity from both potential buyers and sellers during January.
At the same time, figures from the British Bankers' Association showed that the number of mortgages approved for house purchase fell to an eight-month low last month.
Nationwide had also surprised economists with the strength of the market in January, when it reported a 1.4% price rise, more than double the 0.6% increase seen by Halifax.
Howard Archer. chief UK and European economist at IHS Global Insight, said: "It must be borne in mind that house prices are notoriously volatile on a month-to-month basis and February's drop of 1.0% followed an increase of 1.4% in January, which had been the largest rise for five months.
"Nevertheless, the dip in prices reported by the Nationwide ... is supportive to our long-held view that house prices will suffer a significant correction in 2010 and will probably be no better than flat over the year.
"The fact of the matter is that the house price rises that have been seen since early-2009 are out of kilter with the overall economic fundamentals."
Despite the monthly price fall, the annual rate of house price growth increased to 9.2% in February from 8.6% in January, due to steeper falls seen in February last year. The average UK home now costs £161,320 (€180,660), according to Nationwide.
David Smith, senior partner at property consultancy Carter Jonas, said: "We shouldn't be deflated by February's figures.
"Although seasonal factors, the end of the stamp duty holiday and the weather doubtless played a role in February's dip, prices, at the macro level, were becoming disconnected from the broader economy.
"In the long term, a minor correction to the recent rate of price rises will bring stability to the market."
Meanwhile, the Land Registry figures showed that seven areas in England and Wales saw monthly house price rises during January, with London experiencing the biggest jump of 3.9%, followed by the West Midlands at 2.8% and the South East at 2.5%.
But prices continued to fall in the North East, dropping by 1.3%, while they were 1% and 0.8% lower in Yorkshire and the Humber and the North West respectively.
These regions were also the only areas of England and Wales where annual house price changes remain in negative territory, with London seeing the strongest year-on-year rise of 10.5%, followed by the South East at 8.5%.
