Weaker house prices as momentum is lost

4 March 2010 | By Tracey Scott

House prices fell by 1 per cent in February, the latest Nationwide monthly house price index reveals.

The average house price fell by a seasonally adjusted 1 per cent month on month from £163,481 in January to £161,320 in February, ending a strong run of nine consecutive monthly increases.

But Nationwide’s index shows that prices were up by 9.2 per cent year on year in February, compared with 8.6 per cent in January.

Hometrack recorded a 0.3 per cent rise in house prices in February from the previous month but director of research Richard Donnell warns that house prices are not underpinned by solid foundations. He says 2010 has seen a slow start.

’Prices, at the macro level, were becoming disconnected from the broader economy. In the long term, a minor correction to the recent trend of price growth will bring greater stability to the market’

Nationwide says the price decline could be a result of snowy weather and the end of the stamp duty holiday. It says it is too early to say whether February’s drop is the start of a new trend.

Nationwide chief economist Martin Gahbauer says: “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.”

But he adds: “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.”

Carter Jonas senior partner and property consultancy David Smith says: “Prices, at the macro level, were becoming disconnected from the broader economy. In the long term, a minor correction to the recent trend of price growth will bring greater stability to the market.”

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