Further drop in house prices

House prices fell at their fastest rate for almost ten years in March, Nationwide Building Society has said today.

15:10 31 March 2005

House prices fell at their fastest rate for almost ten years in March, Nationwide Building Society has said today.

Prices in March were 0.6 per cent lower than in February, once seasonal upswings had been adjusted for: the fastest month on month fall since June 1995.

The mortgage lender said UK property values are now 7.9 per cent higher than in the same month last year, the first time annual house price inflation has dropped below ten per cent since June 2001.

The average UK house now costs 153,876, the building society found.

But while these figures have promoted fears of a long-term slump, Nationwide emphasised that there is still little likelihood of a crash in house prices.

Alex Bannister, Nationwide's group economist, said: "While this is the biggest monthly fall in prices since June 1995, looked at in context it confirms our view that the market is experiencing a soft landing.

"The fall in March follows small rises in January and February and is consistent with our expectation that house price movements in 2005 would be characterised by rises in some months and falls in others.

"We believe that homeowners and buyers are becoming increasingly realistic about the potential for further house price growth. While expectations came down to earth in London a year ago, it is only recently that buyers in the rest of the country have downgraded their view of future house price inflation."

At a regional level the north-south divide remains, with prices growing fastest in the north of England and in Wales, Scotland and Northern Ireland.

Yorkshire and Humberside saw the fastest annual growth at 15.5 per cent, followed by Scotland (15.4 per cent), the north-west (14.9 per cent) and Wales (14.7 per cent).

London witnessed the slowest annual increase in prices at 3.8 per cent.