House prices fall 2.5% in May

Nationwide recorded a 2.5% fall in UK house prices in May, the biggest monthly decline since the building society began keeping records, in 1991.

According to the lender, house prices have now fallen for the seventh consecutive month (the longest consecutive period of decline since 1992) taking property values 4.4% below May 2007 levels.

Earlier this week, the National Association of Estate Agents reported that the housing market showed signs of stabilising during April and that the average proportion of the asking price achieved was 95.3%.

The news from Nationwide was therefore unexpected and will fuel speculation that a much predicted correction of UK house prices of up to 30% is now on the cards.

The latest Nationwide figures puts the average price of a UK home at £173,583, which is around £8,000 less than one year ago.

However, the figure needs to be seen in relation to the high levels of property prices inflation experienced in recent years; it remains 5% higher than two years ago and 10% above May 2005 prices.

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