The average house price dropped to £233,131 last month, but was 3.2 per cent higher than a year ago.
Britain’s biggest mortgage lender said both buyers and sellers were holding back, meaning that prices are unlikely to fall sharply in the coming months.
The number of mortgages approved remains 40 per cent below where it was prior to the financial crisis and first-time-buyers are finding it difficult to raise a deposit.
“These conflicting challenges, when combined with the ongoing uncertainty around Brexit, have had an impact across the country but most notably in London, meaning that we continue to expect subdued price growth for the time being,” said Russell Galley, managing director of the Halifax.
The fall in March was lower than economists had predicted and followed an unexpected 6 per cent jump in February. Low numbers of sales have meant average prices have been unusually volatile.
Howard Archer, chief economic adviser at EY ITEM Club, said the correction in house prices was to be expected in March following February’s “eye-watering and frankly bizarre” increase.
He added: “The overall impression is that the housing market is currently soft as it is being hampered by challenging conditions with buyer caution currently being reinforced by heightened Brexit and economic uncertainties – although there are significant variations across regions with the overall picture being dragged down by the weakness in London and the southeast.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said he does not expect to see a sustained period of falling house prices.
He said: “Low unemployment and stable mortgage rates are sustaining housing demand, despite Brexit uncertainty.
“Accordingly, we still expect year-over-year growth in the official measure of house prices to stabilise at about 1.5 per cent this year.”
A separate measure from Nationwide last month recorded falling house prices in England for the first time since 2012.
The fall was driven by London and the southeast, with prices rising in every other region.
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