10-year low for homes market

HOUSE prices are falling at their fastest rate for 10 years, according to mortgage lender Nationwide. The UK's largest building society said average values fell 0.6% in March.

The slump dragged the annual rate of increase down from 10.2% to 7.9% - it is the first time the figure has dropped below the 10%-mark since June 2001.

It also signals a reversal from a 0.5% gain in February. 'While this is the biggest monthly fall in prices since June 1995, looked at in context it confirms our view that the market is experiencing a soft landing,' said Alex Bannister, chief economist at Nationwide.

'The fall in March follows small rises in January and February and is consistent with our expectation that house price movements in 2005 would be characterised by rises in some months and falls in others.'

He added that the price of the average home actually rose by around £1,000 in March to £153,876, up £11,000 on a year earlier, but seasonal adjustments meant the index reflected a fall. Essentially, demand in March failed to pick up as normal.

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The slowdown in the property market had provided a wake-up call for Britons, Bannister said. 'While expectations came down to earth in London a year ago,' he said, 'it is only recently that buyers in the rest of the country have downgraded their view of future house price inflation.'

Also publishing its quarterly review, Nationwide said the north-south divide continued to close. House prices in Northern regions continued to rise most rapidly in the first quarter of 2005.

Yorkshire and Humberside recorded the fastest year on year growth at 15.5% followed by Scotland (15.4%), the North West (14.9%) and Wales (14.7%). Meanwhile the market in the South was 'more subdued'. For the seventh quarter in a row, Greater London recorded the slowest annual increase in prices in the UK. Prices in inner London increased by 3.8%, lower than 4.9% in outer areas and 5.3% in the South East.