House prices - and sales - decline

House prices saw a further fall during May (Getty Images)

House prices saw a further fall during May after all but the top end of the market experienced weaker activity, the Land Registry said today.

The average cost of a home in England and Wales dropped by 0.4% in May, to bring the average cost down to £161,823 - 2.2% lower than a year ago - according to the latest industry data.

Housing activity also slowed sharply, with the number of transactions dropping by 13% to 44,803 in March, the latest figures available, from 51,399 at the same time last year.

The May decline was the seventh month out of the past nine that prices have fallen, with the average price now down by 3% from its peak in August.

London is the one place bucking the trend, with prices rising by 2.9% over the past 12 months, though over the month the East Midlands also saw prices pick up slightly.

The number of properties being sold worth over £1 million also surged by 58% from 511 to 805, highlighting the strength of the high end market, a lot of which is based in London.

The weakest areas were in the North East, which saw an annual fall of 6.9%, and Wales, where prices fell 3.5% in May alone.

Howard Archer, chief economist at IHS Global Insight, said the main support for house prices will come from the fact that interest rates are likely to "remain very low for some considerable time to come".

He added: "In fact, it is looking ever more likely that the Bank of England will hold off from raising interest rates until 2012."