Year-on-year fall comes despite a slight rise in the three-month figure, as Halifax describes the market as ‘relatively stable’
House prices fell by 1.2% in August, according to the latest Halifax index, ending three months of price rises.
The average price of a house fell to £161,743, the lender said, although the three-monthly figure showed a 1% rise. The August fall meant prices have now declined by 2.6% since the same month in 2010.
House prices peaked at £168,593 in April 2010 and fell to £160,393 in April 2011 before moving back up to £163,765 in July.
Martin Ellis, housing economist at Halifax, said house prices and activity in the market should be stable over the coming months. The findings are in line with fellow lender Nationwide, which saw prices drop 0.6% in August.
But Howard Archer, chief UK and European economist at IHS Global Insight, was more gloomy, and said the figures reinforced his belief that house prices would come down over the coming months.
“We continue to believe that house prices are likely to fall by around 5% overall from current levels by mid-2012 in the face of persistent troublesome economic fundamentals,” he said. “And the current sell-offs in financial markets and heightened concerns over the global economy are unlikely to do much for consumer confidence and willingness to commit to buying a house in the near term.
“We suspect that squeezed purchasing power, tightening fiscal policy, a softening labour market and persistent serious concerns over the economic outlook will limit potential buyers and weigh down on house prices.”
The fall in prices comes as housing market activity remains low. The Bank of England recently reported that mortgage approvals for purchases rose to a 14-month high of 49,239 in July, but this was still substantially below a monthly average of about 90,000 since 1993.
Archer added: “A level of 70,000-80,000 has in the past been considered consistent with stable house prices.”
The main support for house prices will come from the fact that interest rates are likely to remain very low for some time, he said.
Nicholas Ayre, a director of buying agents Home Fusion, said: “Prices may well have risen 1% over the past three months, but the 1.2% decline in August – double that observed by the Nationwide – carries more symbolic weight.
“August was a catastrophic month for the global and UK economy, and it may well have turned a flat UK property market into one that is falling.
“Although the Halifax rightly points to low sales volumes skewing the data, the relentless flow of grim economic news is taking its toll on prospective buyers. A double dip in the economy is becoming more and more realistic, and if the economy goes down, the property market will go down with it.”
