House prices have fallen for the first time since February, prompting fears that the housing market recovery is over and a downward trend will set in for the rest of the year.
Prices tumbled by 0.5% this month, according to Nationwide. There was also a sizeable decrease in the annual rate of house price inflation, which fell from 8.7% in June to 6.6% in July.
Martin Gahbauer, Nationwide's chief economist, comments: "Despite the introduction of a second stamp duty holiday for the vast majority of first-time buyers and record low interest rates, the number of properties changing hands across the UK is still running at only half the levels seen before the financial crisis and the recession."
The average house price for July was £169,347, a decrease from £170,111 in June. According to Gahbauer, restrictive economic conditions and apprehension about the future continue to limit numbers of house buyers.
"Many potential buyers still lack the confidence to purchase their first home or trade up when faced with uncertainly over future income and employment prospects," he adds.
There is also concern about the supply-demand balance becoming even more stretched, as there has been a big shortage of buyers recently, and an even more severe shortage of properties for sale.
Gahbauer thinks it will take several months to establish whether house prices are simply oscillating around a flat price trend or if a period of downward trending prices is in store.
There were also gloomy predictions this week from the National Institute of Economic Research that house prices will fall 8% over the next five years, when inflation is considered.
This means the property market in 2015 will have returned to the levels of 2003, which could put millions of homeowners in negative equity.
Meanwhile a report from the Land Registry yesterday shows house prices are currently back at the same level as they were in 2006.