Brian Davis, Nationwide's operations director, said that although tax increases due in April would not help the market, low interest rates had made homes more affordable.
He expected activity in the market to pick up, but added: 'Nevertheless, activity will remain well below the levels seen in the late 1980s. Price rises should be modest, with an increase of around 5 per cent possible in 1994.'
John Wriglesworth, housing analyst at stockbrokers UBS, has forecast price rises of 7 per cent for this year. He said: 'One month's fall, especially one this small, means nothing . . . I'm still happy with my forecast.'
According to Nationwide, an average house cost pounds 53,447 in February - pounds 316 less than in January.