House prices fall - but no crash

HOUSE prices fell again in December but an 'orderly slowdown' remains on track, Britain's biggest building society said today. Nationwide said the average price of a home in Britain dipped 0.2% to £152,623 - the second fall in three months.

The year-on-year rate of increase slowed to 12.7% - its weakest for nearly three years.

The lender insists, however, that the market remains on course for a soft landing and expects prices to nudge up by 2% in 2005. During 2004, prices rose by an average of £17,000.

Nationwide group economist Alex Bannister said: 'The evidence is consistent with house prices treading water in most regions. A sharp downturn in prices cannot be completely ruled out, but while the economic outlook remains positive it looks unlikely.

'Importantly, we do not foresee a reoccurrence of the sharp increases in interest rates and large-scale joblessness that resulted in house price falls in the early Nineties.'

Prices rose 1.1% during the fourth quarter, a dramatic slowdown from the 5.3% growth in the first three months of the year. One reason for the downturn is a lack of first-time buyers, with just 349,000 getting on to the property ladder in 2004 - the smallest number since the mid-1980s.

Today's news also suggests many homebuyers are feeling the pinch from the five interest rate rises since November last year. It will fuel speculation that rates will start to fall again in 2005.