House prices fall by 1.2%

House prices fall by 1.2%

The Office of the Deputy Prime Minister said that annual house price inflation had fallen in the 12 months to 3.6% in February, down from 4.6% in January.

Average house prices in February were £148,562 in Wales, £129,020 in Scotland, £138,032 in Northern Ireland and £191,563 in England. Property prices remain highest in London, averaging £263,222.

A 4.6% fall in the price of flats led the dip, while prices of detached houses and bungalows also fell by 1.2% and 1.1% respectively.

By contrast, the most recent house price data published by the lenders Halifax and Nationwide indicated that the market had shown signs of recovery since the start of 2006.

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Last week, Halifax said average prices had risen above £175,000 for the first time, while Nationwide said there had been no change to prices in February, but reported a 1.1% rise in March.

However, the British Bankers Association reported a drop in mortgage lending in February, suggesting that high prices had begun to deter potential buyers.

Howard Archer, chief economist at consultancy Global Insight, said that over the longer term house prices would suffer as a result of "affordability constraints, elevated debt levels and a weaker labour market".

He added that first time buyers would be "particularly squeezed". "Affordability will be pressurised over the coming months by moderate earnings growth, as well as markedly increased utility bills and a further significant increase in council tax.

"Furthermore, growing pension concerns are likely to make an increasing number of people uncomfortable about stretching themselves in buying a house," said Mr Archer.

The ODPM figures are not adjusted to allow for seasonal differences in the property market, and prices are based on completed transactions.