House price growth slumps to 12-year low

Nationwide's research shows that house prices fell for the fifth consecutive month in March.

The price of a typical house fell by 0.6% during the month, bringing the annual rate of house price growth down to 1.1%, its lowest rate since March 1996.

A change in sentiment since the late summer has led to the sharp slowing in house price growth. The price of a typical house in the UK is now £179,110, only £2,027 more than this time last year. However, prices are still 11% higher than two years ago and 47% higher than five years ago - the equivalent of a price rise of more than £30 per day for the last five years.

Fionnuala Earley, Nationwide’s chief economist, said: “Expectations of higher house prices will have undoubtedly encouraged some speculative demand in the housing market over the years, but with lower house price growth expected now and in the future, the effect will work the other way, causing at least some of this demand to fall away.

“The outlook for UK house prices is clearly more downbeat than at the time of our November forecast. Some of the downside risks we identified then have become a reality – most notably the continued turmoil in the financial markets. However, the path for house prices in 2008 still looks set to remain within our forecast range.

“We expect a modest fall in house prices during the year, but such a fall should be seen in context. If prices were to fall in line with consumers’ expectations, they would still be higher than two years ago. A moderate fall in prices at this stage should not be unwelcome and should help to ensure greater stability in the market going forward.”

To see how house prices are expected to fare in your area over the next five years, visit our property price predictor.