THE housing market recovery hit a stumbling block in February as poor weather, more properties being put up for sale and the end of the stamp duty holiday took their toll.
House prices dropped 1.5 per cent last month, taking the value of the average home down to £166,587, according to the latest data from the Halifax.
This is their first monthly drop since June.
However, prices are still up 4.5 per cent on a year earlier and eight per cent higher than the lows hit back in April last year.
Martin Ellis, housing economist at Halifax said: "There has been a decline in the underlying rate of house price inflation – measured by a comparison of the latest three months with the previous quarter – over the last few months.
“An increase in the number of properties available for sale has helped to reduce slightly the imbalance between supply and demand. At the same time, the bad weather in the first two months of 2010, together with the return of the lowest stamp duty threshold to £175,000, are likely to have had an adverse impact on housing demand.”
Prices showed a marked slowdown in the three months to February, standing 1.8 per cent higher than in the preceding quarter, compared with a 3.2 per cent increase on the same basis in January.
Ed Stansfield, chief property economist at Capital Economics said: “The decline in the Halifax house price index is further evidence that the housing market recovery took a backward step at the turn of the year.
"It is possible that temporary factors mean that recent data overstate the true extent of the weakness. Even so, the data do nothing to change our view that the economic outlook is too weak to sustain the recovery in house prices."
The Halifax survey paints a similar picture to that offered by Nationwide which found that prices fell by one per cent to £161,320 during February.
Economists warned that although the month-by-month figures are volatile, the three-month view shows that price increases have slowed significantly.
This dropped to 1.6 per cent for the three months to February, down from two per cent in January and a peak of 3.7 per cent in September.
Howard Archer, chief UK economist at IHS Global insight said: "The fall in house prices in February reported both by the Halifax and the Nationwide is supportive to our long-held view that house prices will be prone to corrections in 2010 and will probably be no better than flat over the year.
"This view is further supported by Bank of England data showing a marked dip in mortgage approvals in January from already relatively muted levels (even allowing for the impact of the bad weather). The fact of the matter is that the house prices rises that have been seen since early-2009 have been out of kilter with the overall economic fundamentals."