UK house prices fell for a second consecutive month

UK house prices fell for a second consecutive month in December, the Nationwide building society says.Prices dropped 0.5% in December after slipping 0.8% in November, but property prices were still up 4.8% year-on-year from December 2006, it said.

The average price of a UK property rose by £8,334 over the year, putting it at £182,080 at the end of 2007.Nationwide said that this month's interest rate cut should help the market recover somewhat later in 2008.

"The housing market has weakened significantly in the closing months of 2007 after holding up more strongly than expected in the earlier part of the year," said Fionnuala Earley, Nationwide's chief economist.

Rankings

Nationwide data also showed that St Albans was the most expensive place to buy property in a survey of 30 towns and cities.

The average house price in the Hertfordshire town rose 13% to £347,563 over the year.Belfast saw the biggest rise in house prices, up 32% over the year to £306,698 - an increase of £201 a day.Durham and Newcastle saw the survey's only fall in house prices.

Average prices fell 3% in both places to £152,902 and £178,309 respectively.

'Worse position'

Nationwide said lower interest rates in 2008 should help demand recover a little, but said it was unlikely that there would be a big recovery like the one seen after the interest rate cut in 2005.

"This is mainly because housing affordability is starting from a much worse position than in 2005, while interest rate cuts have started from a higher and more restrictive level," she said.

The three-month on three-month rate of growth - a smoother indicator of house price trends - fell from 1.4% in November to 0.9% in December, the lowest since November 2005.

Nationwide said the turmoil in the financial markets resulting from the US sub-prime mortgage market, as well as the problems experienced by Northern Rock, had undermined confidence in the property market.

The Bank of England's monetary policy committee voted unanimously to chop interest rates from 5.75% to 5.5% at its last meeting.

Many analysts expect further cuts in the new year to support the flagging housing market and the wider economy.