UK house prices have fallen by the fastest yearly rate in 19 months, according to the Halifax.
Prices fell 4.2% in the three months to May, compared to the year earlier, and by 1.2%, compared to the previous three months. Despite this, the value of the average house rose by 0.1% between April and May to £160,519.
But Martin Ellis, housing economist for Halifax, says prices continue to drift modestly downwards as measured by the underlying trend.
"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," he adds.
Looking forward he predicts a "moderate improvement" in the economy, which, combined with low interest rates, will support housing demand and prevent further marked falls in prices.
House sales low
House sales have remained subdued and the number sold in the first four months of this year was 5% lower than the previous year.
The Nationwide House Price Index for May mirrored this sentiment, reporting a 1.2% annual fall in prices and putting the average price at £167,208. However, it also says the economic outlook is starting to brighten.
Robert Gardner, Nationwide's chief economist, says the modest improvement in economic conditions has so far been insufficient to pull the housing market out of its torpor, as the headwinds facing households remain strong.
But he adds: "The pattern of the recovery also argues against a strong bounce in property prices. Businesses investment and net trade are expected to drive the economy in the quarters ahead rather than consumer spending."