House prices fall 2.8 per cent

Average prices fell 0.9% in February from the month before.

Martin Ellis, housing economist at Halifax, 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."

Peter Rollings, CEO of estate agent Marsh and Parsons, said: “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.”

Paul Hunt, managing director of Phoebus Software, agreed that the Halifax figures were likely to be more volatile than the market overall.

He 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 indices 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.”