House prices fell for the first time in eight months during February as the market was hit by bad weather and the end of stamp duty holiday, figures showed today.
The average cost of a home fell by 1.5 per cent during the month to stand at £166,857, according to Halifax.
The group blamed the slide on a fall in activity caused by the wintry weather during the early part of the year and the stamp duty threshold falling back to £125,000 at the end of December. Halifax added that an increase in the number of properties being put up for sale had helped to reduce slightly the imbalance between supply and demand.
Martin Ellis, Halifax housing economist, said this increase in supply, combined with the fall in activity, helped to curb some of the upward pressure on house prices.
The fall in prices is in line with figures reported by Nationwide for February, which showed property lost 1 per cent of its value during the month - ending nine consecutive months of price rises.
Other indexes have also pointed to a fall in demand since the beginning of the year, with the Royal Institution of Chartered Surveyors reporting a steep drop in activity both from potential buyers and sellers during January.
At the same time, figures from the Bank of England showed a 17 per cent fall in the number of mortgages approved for house purchase during January.
The price drop adds to speculation that the housing market recovery may have run out of steam, with many economists expecting further price falls this year.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The fall in house prices in February reported both by the Halifax and the Nationwide is supportive to our long-held view that house prices will be prone to corrections in 2010 and will probably be no better than flat over the year.
"This view is further supported by Bank of England data showing a marked dip in mortgage approvals in January from already relatively muted levels, even allowing for the impact of the bad weather.
"The fact of the matter is that the house price rises that have been seen since early 2009 have been out of kilter with the overall economic fundamentals."
Despite the fall in house prices in February, Halifax reported annual price growth rising to a two-year high of 4.5 per cent, up from 3.6 per cent in January, based on average prices during the past three months compared with the same period a year earlier.
The group said the average house price was also still around 8 per cent higher than when property values hit their trough in April last year.
But there was a slowdown in the three-month-on-three-month growth rate, which is generally seem as a more stable indicator of underlying market trends.
Prices rose by 1.8 per cent during the three months to the end of February, down from an increase of 3.2% in the quarter to the end of January.
Ed Stansfield, chief property economist at Capital Economics, said: "The decline in the Halifax house price index is further evidence that the housing market recovery took a backward step at the turn of the year.
"It is possible that temporary factors mean that recent data overstate the true extent of the weakness.
"Even so, the data do nothing to change our view that the economic outlook is too weak to sustain the recovery in house prices."Reuse content