Although house prices rose by 0.5% in quarter four of 2012, 11 out of 13 regions saw price falls during last year while London performed strongest and Northern Ireland experienced large price falls.
Robert Gardner, Nationwide's chief economist, said: "UK house prices were little changed in December, declining by just 0.1% over the month, though this was sufficient to keep the annual rate of price growth in negative territory for the tenth month in succession.”
The typical UK home is now reported to be worth £162,262 however within England the North South divide in property prices continued to widen.
Gardner said that given the economic challenges the country faced in 2012 a 1% decline in house prices could be viewed as a relatively resilient performance.
But he said conditions for 2013 remained fragile as other signs of housing market activity such as mortgage approvals remained subdued.
Jonathan Hopper, managing director of the property search consultants Garrington, said: "While the employment market was surprisingly robust during 2012 wage growth was low and living costs high. This dampened consumer confidence and the demand for property which in turn kept prices low.”
Hopper said people will only buy when it instinctively feels right. And he added: "Relatively high levels of employment do not equate to confidence. Confidence is primarily driven by spending power and sentiment and these remain weak in the average UK household.”
Property transactions have been greatly reduced which independent buying agent Gabby Adler said was owing to a lack of confidence among would-be buyers and sellers with wider economic troubles and the problems in Europe also playing a part. But he said vendors had started to price their properties more realistically on the whole with significant price decreases occurring in recent months.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said Funding for Lending would encourage a more positive picture for the housing market and mortgage market in 2013.
But he added: “Certain criteria will still remain tight even while mortgage rates fall a little so borrowers will need to seek advice if they want to take the plunge, particularly if their circumstances are even slightly complicated or unusual.”
Ben Thompson, MD Legal & General Mortgage Club,said: “Whilst house prices averaged 1% lower in 2012, effectively negating the 1% rise we saw at the end of 2011, there is hope that over the next 12 months, the outlook will improve.
"Although we can predict the housing market will remain broadly flat in 2013, the mortgage market does look set to benefit in the first half of the year from fierce price competition on lower LTV products. The number of remortgages we see approved is also likely to increase in 2013.
"In the latest report we commissioned in conjunction with CEBR, we examined what the ‘New Normal’ in the housing market is likely to look like, and when it is likely to return. The report predicts that by mid 2013, house prices should start to climb, reaching their 2007 peak of £227,000 by 2015.
"This is clearly great news for the economy, but caution is needed as we are not out of the water yet. The Bank Base Rate is unlikely to rise from its current 0.5% in 2013 and unfortunately for first time buyers, there will still be a lack of suitable property for sale. House purchase therefore looks set to remain quite flat in 2013 and still significantly lower than historical averages. In response to this, the Government needs to increase their focus on building new, affordable homes.
"Overall, however, providing there are no nasty surprises, new lending in 2013 should be up on the numbers we saw in 2012 but lenders and the government alike need to do their bit to ensure the housing market really can start to recover from the slump it has seen over the last five years.”
