House prices fall by 0.2% during May

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House prices in England and Wales fell by 0.2% during May, the first monthly drop for a year, figures showed today.

The fall follows a rise of just 0.1% in April and no change in March, and leaves the average home costing £165,314, according to the Land Registry.

The annual rate of house price growth also fell during the month, dropping to 8.2% compared with 8.5% in April - the first time annual house price inflation has worsened since February last year.

The figures come as property intelligence group Hometrack said house prices edged ahead by just 0.1% during June as demand from potential buyers stalled.

The housing market suffered a slow start to the year due to a combination of the end of the stamp duty holiday, the severe winter weather and uncertainty caused by the general election.

But the market has failed to regain momentum as the impact of these factors has worn off, leading economists to speculate that the recovery may have run out of steam.

The Land Registry figures showed that the number of homes being sold had picked up in March, the latest month for which figures are available, with 48,577 properties changing hands, 37% more than in the same month of 2009.

But the figure still remains well down on the 77,408 sales completed in December.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The Land Registry data for May and the June Hometrack survey both add further substance to our long-held belief that house prices will struggle to make significant gains over the coming months.

"Housing market activity remains well below long-term norms despite edging up recently. The economic fundamentals of high unemployment, still falling full-time employment and low earnings growth are hardly ideal.

"Also very significantly, more properties are coming on to the market thereby moving the supply/demand balance more in favour of buyers."

House prices rose in only three regions of England and Wales during May, with the South East leading the way with a gain of 0.9%, followed by London at 0.7% and the North West at 0.5%, while prices in Yorkshire and The Humber were unchanged.

But at the other end of the scale, house prices fell by 3.6% in the East Midlands and by 1.9% in the North East.

All regions reported positive annual house price growth, with London continuing to post the biggest gain of 14.2%, while house prices in the North East are only 1.8% higher than they were a year ago.