The drop in prices after a buoyant January, which saw a price rise of 1.5 per cent, has left the building society slightly concerned as to the future strength of the market and with the house-buying season poised to kick off in earnest in March, Nationwide say the activity in the next couple of months will be a vital indicator.
Greg Fuzesi, senior economist at Nationwide, said: “As we enter the all-important house buying season in March, the prospects for both house prices and interest rate policy will become clearer. It will also show whether February’s fall is just a pause before the spring rush or the first sign of weak market fundamentals weighing down on prices.”
Other factors that also worried Nationwide were the continued inability of first-time buyers to get onto the property ladder and the brittle state of the economy.
Fuzesi added: “The UK economy remains highly reliant on strong consumer spending but high debt levels, high fuel prices, a weaker appetite for borrowing and uncertainty over pensions pose some risk to this. Also, if the recent strengthening of the housing market does not persist, consumers could be further discouraged from spending.”
One note of optimism was the increasing strength of the buy-to-let market, with Nationwide pointing to an increase of 11 per cent over the last six months in mortgages in this sector.
James Cotton, mortgage specialist at London & Country, said: “You can’t just look in isolation at February’s fall, which comes on the back of a strong rise in January. It’s been a pretty healthy year so far and realistically, it’s a very small fall so I think its still good news in terms of the market.”
