House prices fell for the fifth month in a row

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House prices fell for the fifth month in a row during March as the market continued its downward trend, figures have shown.

The average cost of a home in the UK dropped by 0.6% during the month to stand at £179,110, according to Nationwide Building Society.

At the same time, annual house price growth also continued to ease, slowing to just 1.1%, its lowest level since March 1996, and less than half the year-on-year gain of 2.7% recorded during February.

The average home now costs just £2,027 more than it did in March last year, with prices falling by 2.9% during the past five months.

Fionnuala Earley, Nationwide's chief economist, said: "A clear change in sentiment since the late summer has led to the sharp slowing in house price growth, even in the less volatile three-month on three-month series.

"Prices on this measure are now 1.5% lower than three months ago. The price of a typical house in the UK is now £179,110, only £2,027 more than this time last year."

But she added that prices were still 11% higher than they had been two years ago and 47% higher than they were five years ago.

The group said deteriorating affordability, higher interest rates and slow earnings growth were already beginning to affect house prices in early 2007, although this was not reflected in consumers' expectations for property price growth.

But since September, people's expectations have been falling sharply, coinciding with the turmoil in the financial markets and the problems at Northern Rock, as well as a slowdown in annual house price inflation.

Nationwide said lower consumer expectations would cause at least some of the demand in the housing market to fall away.