House prices dip in 'soft' market


House prices have dipped further amid the "soft" market, recording declines in four months out of the last five, Nationwide said today.

The 0.2% monthly drop in April follows a steeper 1% fall recorded the previous month, meaning average UK house prices now stand at £164,134, the building society said.

Prices remain 0.9% lower than a year ago, a figure unchanged from March, and the market is likely to remain "subdued" over the next 12 months as people stay cautious about the state of the economy, the report said.

The study suggested that much of the recent softness in the market is likely to be due to the ending of a stamp duty concession for first-time buyers.

It said a rush of buyers to complete deals before the concession ended in March had the effect of bunching up sales which would have otherwise taken place later this year.

Around four in 10 first-time buyers have benefited from the concession during the two-year period it was in place, according to recent research.

Robert Gardner, chief economist for Nationwide, said: "Much of the recent softness in measures of housing market activity and house prices is likely to relate to the expiry of the stamp duty holiday in late March.

"This provided a temporary boost to house prices in early 2012 as buyers brought forward purchases that would otherwise have taken place later in the year."

He suggested that the effects of this will fade in the coming months, but warned that the "challenging" economic backdrop means that significant price rises are unlikely in the near future.

The report said the recent return to a recession is likely to undermine "fragile" confidence even further and discourage consumer spending.

Although the UK economy is set to pick up during the second half of this year, it will be some time before the "feelgood" factor filters through to squeezed households, the study warned.

The report said: "Housing market activity is also likely to remain subdued, with prices showing little growth or moving modestly lower over the next 12 months."

Borrowers are also facing tougher hurdles to getting a mortgage in the first place. Availability is expected to decrease in the coming months as lenders tighten their borrowing criteria, something which has already triggered a fall in the proportion of mortgages being approved by lenders.

Bank of England figures showed yesterday that the number of mortgage approvals for house purchase rose by 1.5% in March but remained firmly below the previous six-month average.

More than a million home owners saw the cost of their repayments go up this week as lenders pushed up their rates, blaming the weak economy and the increased cost of funding a mortgage.