House prices tumble 0.5%

House prices fell in February for the fourth consecutive month by 0.5 per cent, the latest survey by Nationwide revealed today.

It means the annual rate of house price growth is down to 2.7 per cent - the lowest seen since November 2005 in the survey.

The further fall shows a marked fall on January prices which suffered a monthly dip of 0.3 per cent and saw annual inflation of 4.2 per cent.

Nationwide said the trend in prices showed an obvious weakening. However, it pointed out the annual rate between January and February overstated the rate of decline because it reflected the fact prices suffered a strong increase in February last year.

According to Nationwide, the average price of the typical UK property has increased over the last year by £4,653 and now stands at £179,358. This means house prices have risen, on average, £12.75 per day, over the last 12 months.

Yet the fourth fall in monthly prices will send out strong signals the UK is to see a housing market slowdown in 2008.

Fionnuala Earley, Nationwide's chief economist, said falling house prices in February did not come as a shock considering the weakening trends in other housing demand indicators, such as falling house purchase approvals and a decline in interest from new homebuyers 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 the market was not as gloomy as it might seem.

Ms Earley, said while we were unlikely to see recent rates of growth, in either the UK economy or housing market, repeated for some time, if Bank of England projections were correct conditions for the housing market were not so bad looking forward.

However, 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.

"Furthermore, many homeowners are currently having to re-fix their mortgages at significantly higher rates."