Report shows drop in house prices

The average price of a house fell month-on-month to £161,743 in August, although the “more reliable” quarterly change showed a 1 per cent rise.

Martin Ellis, housing economist at Halifax, said prices and activity in the market should be stable over the coming months. The findings are in line with fellow lender Nationwide, which saw prices drop 0.6 per cent in August but reassured the decline did not change a “relatively stable” picture.

House prices peaked at £168,593 in April 2010 and fell to £160,393 in April this year before moving back up to £163,765 in July.

Howard Archer, chief UK and European economist at IHS Global Insight, said the figures reinforced the belief that house prices would come down over the coming months. IHS forecasts prices falling by around 5 per cent by mid-2012.

Mr Archer said: “We suspect squeezed purchasing power, tightening fiscal policy, a softening labour market and persistent serious concerns over the economic outlook will limit potential buyers and weigh down on house prices.”

The fall in prices comes as activity in the housing market remains low.