House prices fell for the first time in 10 months during February as the market suffered a sharp slowdown in activity, figures showed today.
Nationwide Building Society attributed the 1% drop to a combination of the severe winter weather during the early part of the year and the end of the Government's stamp duty holiday.
The fall, which ended nine consecutive months of price rises, did not come as a surprise as the Royal Institution of Chartered Surveyors had pointed to a steep drop in activity from both potential buyers and sellers during January.
At the same time, the British Bankers' Association had reported that the number of mortgages approved for house purchase fell to an eight-month low last month.
Nationwide had also surprised economists with the strength of the market in January, when it reported a 1.4% price rise, more than double the 0.6% increase seen by Halifax.
But the slide will fuel speculation that the housing market recovery has run out of steam, with many economists expecting house prices to resume their downward trend this year.
Martin Gahbauer, Nationwide's chief economist, said: "There is evidence from a range of indicators that the market may have lost momentum in early 2010 as the stamp duty holiday ended and house hunters were obstructed by the icy weather.
"This drop in demand seems to have fed into agreed prices during February.
"At this stage, it is difficult to gauge how much of the drop in housing activity is attributable to one-off factors and therefore whether February's fall in prices is just a temporary blip or the start of a new trend."
Despite the monthly price fall, the annual rate of house price growth increased to 9.2% in February from 8.6% in January. The average UK home now costs £161,320.
The three-month-on-three-month measure, usually seen as a more stable indicator of market trends, remained positive in February at 1.6%, although this was down from 2% in January and a peak of 3.7% in September.
Nationwide said even without the snowy weather and end of the stamp duty holiday, which appears to have caused many people buying lower value properties to have rushed through purchases before the end of last year, it was unlikely the market could have maintained the very strong momentum seen for most of 2009.
It said in the light of low growth in household incomes and high levels of unemployment, house prices were beginning to move ahead of the recovery in general economic conditions.
Mr Gahbauer said: "With the longer term stability of the market in mind, it would be a positive development for house prices not to become decoupled from the economic fundamentals.
"A pause in the upward trend will also be a relief to potential first-time buyers who are no longer benefiting from the stamp duty holiday and for whom affordability had begun to deteriorate again over the course of 2009."Reuse content