House prices fell 4.2 per cent year-on-year in May, according to the latest house price index from Halifax.
On a monthly basis, house prices increased by 0.1 per cent from £160,393 to £160,519.
Prices fell by 1.2 per cent in the three months to May compared to the previous three months.
Halifax housing economist Martin Ellis says: “Low earnings growth, higher taxes and relatively high inflation are all putting pressure on household finances. Confidence is also weak as a result of uncertainty about the economic and employment outlook. These factors are probably constraining housing demand and applying some downward pressure on prices.
“Overall, we expect a moderate improvement in the economy during the remainder of 2011, which combined with continuing low interest rates, is likely to support housing demand. This should prevent a further marked fall in prices and help to stabilise property values later in the year.”