House prices down 0.9%

Property values were 2.8% lower than a year earlier, the biggest drop since October 2009 – based on average prices during the three months to the end of February and the same period a year earlier.

Prices fell by 0.9% during February itself, more than wiping out January's 0.8% rise.

The latest figures continue the recent pattern of house prices rising during one month and dropping during the next, with Halifax recording five increases and seven falls during the past year.

The three-month-on-three-month measure, generally seen as a smoother indicator of trends, showed a 0.4% decline, suggesting prices are moving steadily downwards but at a slower pace than during the final quarter of 2010.

The drop is also well down on quarterly falls of 5% and 6% recorded during the second half of 2008.

House prices remain under pressure due to a lack of demand, as people delay moving home in the face of the uncertain outlook for both the property market and the wider economy.

Meanwhile, problems in the mortgage market mean those who want to buy are struggling to raise money.

But there is evidence that the number of homes being put up for sale is beginning to slow, which should support prices as fewer properties on the market mean less chance of buyers haggling prices down as they have fewer options.

Martin Ellis, Halifax housing economist, says: "Overall, we expect a modest 2% decrease in house prices in 2011. Uncertainty over the economic outlook is likely to weigh down on housing demand this year.

"Fewer properties have been coming on to the market in recent months. This trend, if sustained, should improve the balance between demand and supply and help to prevent a more significant fall in house prices."

The figures contrast with ones reported by Nationwide earlier this week, which showed house prices rising by 0.3% during February, with the cost of a home broadly unchanged from a year earlier.

Howard Archer, chief UK and European economist at IHS Global Insight, says: "The Halifax house price index has actually been pretty volatile over the past few months showing significant fluctuations around an overall modestly declining trend. We expect this trend to continue for some time to come."

Further reading/Key links

Valuation Loophole: Free House Price Valuation Cut home loan debt: Free Remortgage Guide, Free Mortgage Guide Latest House Prices: Nationwide, Land Registry, Halifax