February house prices drop 0.5%

The latest house price survey from Nationwide shows a 0.5% drop in prices in February.

The fall, which is for the fourth month in succession, puts the cost of the average UK home at £179,358.

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

Taking the more reliable three month period, house prices fell 1% between December and February, when compared with the previous quarter.

For the previous three-month on three-month period the decline stood at -0.4%.

While the building society is warning against gloomy predictions for the housing market it concedes that the trend is one of weakening prices.

However, Nationwide points out that the February drop in the annual rate of increase is overstated because house price growth was particularly strong in January and February last year.

Nationwide’s chief economist, Fionnuala Earley, believes that the market is unlikely to be underpinned by aggressive rate cuts in the coming months, stating: “It should not be surprising that we are entering a slower phase.”

However, she believes: “It is encouraging that the outlook is one of just that, slower economic growth rather than recession.”

Ms Earley admits that there is a reluctance among house buyers because of uncertainty in the market but holds the view that conditions for the UK housing market are “perhaps less gloomy than some would have us believe.”

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