But Gary Marsh, economist at the Halifax, said that after rises of 1.4 per cent in March and 1.7 per cent in April, the downward move was not surprising. 'At this stage of the cycle you can get quite sharp changes. But in the background all the indications are that the market is recovering. Prices will settle down in the second half of the year.'
He is confident that house prices at the end of 1993 will be slightly higher than at the start of the year. The price of an average house is now pounds 62,744 - 3.3 per cent down on a year ago.
Prices paid by first-time buyers in May fell by 0.7 per cent, but are 5 per cent below a year ago. The average first-time buyer is now paying pounds 45,334 for a home, and borrowing 89.3 per cent of the price.
Adrian Coles, the new director-general of the Council of Mortgage Lenders, said there has been a sharp reduction in the number of 16- to 34-year- olds who aspire to home ownership, and the number of 20 to 24-year-olds who believe renting is best has risen from 4 per cent in 1989 to 11 per cent.
'Individuals have seen that owner- occupation is not as flexible a tenure as it might be and that there is a significant risk of house prices falling as well as rising, trapping people in their homes at a time of their lives when mobility is a premium.'
Last year, loans to the under-25s as a percentage of all loans, fell to the lowest level for 25 years. Mr Coles said that meant building societies could be facing a difficult three or four years while the average age of first-time buyers increased.
The prices of new houses show a rosier picture, with a rise of 0.8 per cent from last May. This is the first time prices of new houses have risen since October 1990. The average price of a new house is now pounds 68,874. Mr Marsh said new houses tended to lead the way. 'Builders cut prices first, but now they are sensing that they can sell houses, and prices are hardening.'
John Wriglesworth, housing analyst at the City stockbrokers UBS, said: 'We are bumping along the bottom. Perhaps it was too soon to spot green shoots, but seeds have been sown.'
He expects further house price falls before the end of the year, leaving prices unchanged from the beginning of the year, with an upsurge averaging 7 per cent in 1994.Reuse content