House prices fall more than expected in August

UK house prices fell 1.2 per cent in August, mortgage lender Halifax has said, after an 0.5 per cent fall in the second quarter, reinforcing views that current prices cannot be sustained by cash-strapped UK buyers.

The fall is about twice the 0.6 per cent fall posted in the rival Nationwide measure of house prices.

Average house prices fell to £161,743 in August from £163,765 in July, almost a fifth lower than the all-time peak of £199,612 seen in August 2007.

Prices were 2.6 per cent lower in the three months to August compared to the same quarter in 2010, Halifax said.

The bank said it saw an improvement in the trend and warned that low volumes of sales had affected the data, but experts warned that the fall was significantly larger than expected.

“We suspect that 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,” said IHS Global Insight chief UK economist Howard Archer.

“These factors are seen outweighing the support to house prices coming from extended very low interest rates.”