Page last updated at 09:17 GMT, Friday, 29 February 2008

Property prices fall in February

Estate agent's window
Prices are down for the fourth month in a row

House prices fell in February by 0.5%, says the latest survey from Nationwide.

The fourth consecutive monthly fall in property prices pushed the cost of the average UK home down to 179,358.

The annual rate of house price inflation fell from 4.2% in January to 2.7% in February, the lowest since November 2005.

But the building society warned against gloomy predictions for the housing market, claiming that recession was "a remote risk for the UK economy".

"It should not be surprising that we are entering a slower phase," said the Nationwide's chief economist Fionnuala Earley.

"It is encouraging that the outlook is one of just that, slower economic growth rather than recession," she added.

Trend continues

It is the first time since 2000 that the Nationwide has recorded four monthly price falls in a row and the pace of decline seems to be speeding up.

Prices are likely to drift lower

Prices in the December to February period were down 1% from the previous three months, a steeper decline than the previous three-month on three-month figure of -0.4%.

Various surveys have charted a decline in the housing market since last summer, with figures released on Thursday from the Land Registry also showing a slowing in the annual rate of house price inflation.

Nationwide said its own figures were overstating the situation because house price growth was particularly strong in January and February last year.

But the Royal Institution of Chartered Surveyors (Rics) said it expected the downward trend to persist for some months.

"Crucially with lenders scaling back loan to value ratios and generally favouring existing homeowners in terms of lending rates, first time buyers are continuing to struggle to get a foothold in the property market," said the Rics chief economist Simon Rubinsohn.

"Without their renewed support, prices are likely to drift lower."

'Uncertain market'

Aggressive rate cuts in the coming months were unlikely, said the Nationwide, but the economy was much weaker than it was a year ago.

House price graph

Ms Earley added that the reluctance of buyers given the current uncertainty in the market was not a surprise, but conditions for the UK housing market were "perhaps less gloomy than some would have us believe".

Higher energy bills and food costs have put more pressure on household finances.

Meanwhile lenders have become more fussy about who they lend to because of the crisis in the banking industry.

No more so-called 125% mortgages are available and the 100% mortgage market has shrunk significantly in recent months.

The Bank of England's Monetary Policy Committee cut interest rates from 5.5% to 5.25% in February.

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