Nationwide figures revealed that house prices fell by 1% in February compared to January, ending a strong run of nine consecutive monthly increases, and bringing the average price of a typical property during February to £161,320.
The building society said the drop in demand in January caused by the end of the Stamp Duty holiday and the icy weather seemed to have fed into February’s price drop.
However, Martin Gahbauer, chief economist at Nationwide, admitted that it was hard to know whether February’s fall was a temporary blip or the start of a new trend.
David Smith, senior partner at property consultancy Carter Jonas, said the market should not be deflated by February’s figures.
He explained: “Although seasonal factors, the end of the Stamp Duty holiday and the weather doubtless played a role in February’s dip, prices, at the macro level, were becoming disconnected from the broader economy. In the long term, a minor correction to the recent trend of price growth will bring greater stability to the market.”
Jonathan Cornell, communications manager at First Action Finance, said he believed that prices would enter a steady period before picking up in the second half of the year.
However, he added: “The end of the Stamp Duty holiday and the normal slowdown around the Christmas period led to less market activity and a lack of demand. I doubt that house prices will fall off a cliff and a slight drop means the market will be better off. It is also good news for first-time buyers because properties are cheaper.”
However, Richard Donnell, director of research at Hometrack, disputed the impact of Stamp Duty and said a lack of homes for sale was keeping an upward pressure on prices.
He pointed to the latest Hometrack house price survey – conducted through estate agents and surveyors and measures asking prices – which showed that house prices rose by 0.3% over February.
Donnell added: “Many agents have cited the worst winter for many years and the end of short-term relief on Stamp Duty as reasons for the slower start to the year. However, Hometrack’s analysis of transaction volumes shows that the Stamp Duty impact is probably being overstated with no clear evidence of a major increase in sales between £125,000 and £175,000 over 2009.”
