House prices continued to fall in May, with the latest figures from the UK’s biggest mortgage lender Halifax revealing a monthly fall of 2.4% and an annual drop of nearly 4%.
Halifax says the falls are being caused by the lack of new buyers, many of whom are unable to secure credit from mortgage providers because of lending restrictions.
But the bank says the falls should be taken in the context of “significant gains” in recent years. UK prices increased by 79% over the five years to August 2007, with the average UK price up in value by more than £88,000 between August 2002 and August 2007.
Nationwide's figures also show house prices nosedived in May with average properties suffering a 4.4% annual decrease in value.
Its latest house price index shows that the pace of house price falls accelerated last month amid a climate of negative sentiment, higher inflation and static interest rates.
The building society says prices fell by 2.5% between April and May, bringing average prices to 4.4% lower than the same time last year. However, prices are still 5% higher than two years ago and 10% higher than three years ago. And Nationwide says borrowers are better placed to weather the storm than in the 1990s.
House prices fell by 2.5% during May, the largest recorded monthly fall in the history of the Nationwide monthly index. At seven months, this is also the longest consecutive period of monthly falls since 1992.
The Land Registry has also reported an dip in prices, with annual house prices in England and Wales decreasing by 2.7% in April. This brings the average property to £183,626.
The monthly change for April is -0.2 per cent. The volume of transactions was also down from the same period last year, with an average of 72,479 per month between November 2007 to February 2008, compared with 103,141 per month from October 2006 to January 2007.
Fionnuala Earley, chief economist at Nationwide, says: “A further fall in house prices in May was not unexpected, and for most of those not wishing to move house or borrow money secured on it, the fall in value of their home is likely to be of limited concern in the short term.”
Nationwide's figures are the national average, and, as the National Association of Estate Agents (NAEA) points out, not all regions will have felt such a significant fall.
Peter Bolton King, chief executive of the NAEA, says: "The national sales figures do not tell the whole story. We know from our members that the picture is still very regional with some areas continuing to do better than others."
King says consumer confidence is key to the health of the housing market. "It is apparent that some people are adopting a ‘wait and see attitude', watching the market, before making any decisions, which is affecting prices," he adds.