Biggest setback to house prices for three years

House prices have showed their sharpest decline in nearly three years amid the “challenging” economy, the Nationwide said yesterday.

Prices for an average house fell by 0.6 per cent between May and this month, according to the building society’s latest house price index. In the year to June, they slipped 1.5 per cent to £165,738 on average, the biggest fall since August 2009,.

The study suggested the decline was partly due to the ending of a stamp duty concession for first-time buyers in March, which had the effect of bunching up sales.

It said there were “few signs of a near-term rebound”, as economic conditions remain tough.

Robert Gardner, Nationwide’s chief economist, said prices are likely to remain “fairly stable” over the next 12 months amid a lack of homes on the market, continuing a trend seen over the past two years.

There are hopes that a “funding for lending” scheme announced by the Bank of England and the Treasury earlier this month could help kick-start lending.

Analysts have said this may put the brakes on recent rate increases, although those currently unable to get a mortgage may see little improvement.

Mr Gardner said: “The slightly weaker trend we’ve observed since March is unsurprising, given the difficult economic backdrop, with the UK economy dipping back into recession at the start of the year and few signs of a near-term rebound.

“Economic conditions are expected to remain challenging over the next 12 months. However, policymakers’ efforts to bolster the supply of credit to the economy and to help lower the cost should provide support to demand.

“Overall, this suggests a continuation of the pattern experienced over the past two years, with prices remaining fairly stable over the next 12 months.”

VICKY SHAW