House prices fall amid shortage of buyers

A shortage of buyers sent house prices falling in July for the first time since February, figures showed today.

The average price of a UK property dropped 0.5% to £169,347 between June and July, according to Nationwide Building Society.

It said the fall came as househunter numbers dwindled amid uncertainty over jobs and the wider economy as the Government ramped up its austerity drive.

The scrapping of home information packs (Hips) also tempted more sellers on to the market, which has seen supply outstrip demand.

July's fall comes after growth stalled in June, although prices remain higher on a year-on-year basis.

Nationwide said prices were 6.6% higher on an annual basis in July - lower than the 8.7% in June.

It added that, despite record low interest rates and a stamp duty holiday for most first-time buyers, the number of properties changing hands across the UK is running at half the levels seen prior to the financial crisis.

Martin Gahbauer, Nationwide's chief economist, said: "A combination of restrictive credit conditions and uncertainty about the future economic outlook continues to limit the pool of buyers to those with relatively large financial resources.

"Many potential buyers still lack the confidence to purchase their first home or trade up when faced with uncertainty over future income and employment prospects."

He said it would take several months to establish if the market is on a downward trend, or if prices are merely flattening out.

However, a gloomy prediction yesterday from forecasting body the National Institute of Economic and Social Research (NIESR) suggested the market is on a clear path down.

The group warned that house prices would fall by around 8% over the next five years, with inflation taken into account, as the Government's austerity measures hit confidence.