This measure of the underlying trend shows that the pace at which prices are falling remains significantly lower than the 5-6% quarterly declines recorded during the second half of 2008.
Prices in February were 2.8% lower than a year ago as measured by the average for the three months to February against the same period a year earlier. This is the biggest annual decline since October 2009.
The decline in properties coming onto the market continues. The latest RICS survey showed a reduction in new seller instructions for the fourth successive month in January. This trend, if sustained, should improve the balance between demand and supply and help to prevent a more significant fall in house prices.
House sales remain low. The number of mortgages approved to finance house purchase – a leading indicator of completed house sales – increased by 7% between December and January on a seasonally adjusted basis, according to Bank of England industry-wide figures.
Despite this increase, approvals remain historically low with the total number in the three months to January being 4% lower than in the preceding three months.
Commenting, Martin Ellis, housing economist, said:
"House prices, as measured by the underlying trend, continue to fall slightly with prices in the three months to February 0.4% lower than in the previous three months. There has, however, been little change in house prices over the first two months of 2011 as a whole. February's monthly decline of 0.9% offset January's 0.8% gain.
"Overall, we expect a modest 2% decrease in house prices in 2011. Uncertainty over the economic outlook is likely to weigh down on housing demand this year.
"Fewer properties have been coming onto the market in recent months. This trend, if sustained, should improve the balance between demand and supply and help to prevent a more significant fall in house prices."
Jonathan Moore, director of Easyroommate.co.uk, comments:
“A drop in house prices is nothing but good news for potential first-time buyers. But we need to see a sustained fall before the situation noticeably eases for would-be buyers. Unaffordably high house prices are being compounded by unrealistic demands for enormous deposits by lenders.
"No wonder homeownership is now falling in Britain, and young people are preparing for lifelong renting – by necessity rather than choice. In London, where young people flock to find work, the average cost of renting a room in a flatshare is already £641 per month.
"Without an improvement in mortgage availability to get first-time buyers into their own homes, the rental market will continue to feel the pressure of increased demand and rent will continue to rise.”
Paul Hunt, managing director of Phoebus Software said:
“Although these figures show house price growth has been flat since the beginning of the year, it appears so far been a bumpy ride. Given that the Halifax index is compiled through the number of approvals it makes, the sample size may be partly to blame for this volatility.
"The valuable message from this index is that sustained growth is unlikely to return to the wider market until mortgage lending picks up. While most house price indexes showed small price increases last month, this will not become sustained growth until doubts about rising inflation and unemployment are lifted from lenders’ minds.
"While I am sceptical that prices have been moving as much as Halifax suggest, it’s worth remembering that market activity remains subdued and this will keep a check on prices as the year goes on.”
Peter Rollings, CEO of estate agent Marsh and Parsons, comments:
“Halifax’s figures paint a gloomy portrait of the housing market in February – but they must be taken with a pinch of salt. Halifax’s lending has become so restricted that it’s no surprise that their index has become so volatile.
"The steep decrease is likely to be more to do with the unexpectedly high 0.8% increase they reported last month than from any sudden drop off in the UK housing market. The real barometer of the health of the housing market is activity. In London, this has done anything but fall away, and intense competition for the limited supply of property is once again triggering bidding wars.
"With bonus season starting to take hold, and the ongoing concerns over the unrest in North Africa and the Middle East, even stronger numbers of cash investors are entering the market, driving demand.
"58% of our buyers in central London are cash buyers, unaffected by the nation’s ongoing mortgage famine, and this is set to grow further in the short-term as investors look to move before the Stamp Duty hike in April.”
Nicholas Ayre, a director of buying agents, Home Fusion, said:
"The difference between the Nationwide's positive growth in February and the near one percent decline noted by the Halifax drives home the lack of direction in the housing market. There is huge uncertainty about where the market is now and where it is headed next.
"This kind of uncertainty around price direction hugely undermines buyer confidence.
"The trending down over three months does suggest the market overall is weakening. A 2% decrease overall during 2011 doesn't seem too far off the mark but expect sharper falls in areas where unemployment is rising more sharply and some areas to prove far more resilient.
"For the time being fewer properties are coming onto the market but this cou
