UK house prices slip in February freeze

By Elliot Wright, 26th February 2010

House prices fell for the first time in ten months as cold weather and the end of the stamp duty holiday caused a slip in the market.

Nationwide building society reported a 1% drop in the average house price in February, ending a run of nine consecutive monthly increases.

The average price of a property sold dropped to £161,320 from £163,481 in January.

The fall did not come as a shock to experts, however, with the Royal Institution of Chartered Surveyors highlighting a big decrease in both potential buying and selling activity during January.

In addition, mortgage approvals for house purchase fell to an eight-month low last month, according to the British Bankers' Association.

Nationwide said it is too early to say whether February's drop is the start of a new trend. Despite the fall the annual rate of house price inflation still managed to increase from 8.6% to 9.2% on last year, as this month's fall was smaller than the 1.5% decline recorded in February 2009.

"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," said Nationwide's chief economist Martin Gubhauer.

"New buyer enquiries dropped sharply in the New Year and there was also an associated drop in the number of new mortgages taken out by homebuyers in January.  This drop in demand seems to have fed into agreed prices during February. 

"Judging from the fall in retail sales during January, however, the housing market does not appear to be the only sector of the economy to have experienced a setback related to adverse weather and the expiry of economic stimulus measures. 

"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," he added.

Claims Financial