House prices have fallen for two consecutive months for the first time since February 2009, according to the Nationwide building society.
Prices fell by 0.9 per cent in August and 0.5 per cent in July with the average house price now standing at £166,500.
Martin Gahbauer, Nationwide’s chief economist, explained the drop: “Recent market trends remain consistent with an unwinding of the supply-demand imbalance that drove up prices for much of the last year. As more sellers have returned to the market, buyers have a greater selection of properties to choose from and more bargaining power with which to bid down asking prices”.
He added: “As such, the current period of price declines is likely to remain relatively modest. Given that the price increases of the last year had gotten ahead of the recovery in the wider economy, the current correction is not an unhealthy development”.
The price drop is good news for first time buyers who have been waiting for houses to become more affordable. However, the high deposits that many lenders are demanding are making it difficult for potential buyers to muster up enough cash to become eligible for a mortgage.
Mr Gahbauer explained that the shift in prices does not mark the beginning of a downward spiral: “The market is simply readjusting after getting ahead of itself. The market is stabilising, not collapsing”.