UK house prices fall 2.5% in March

House prices fell by 2.5% in March, prices in Quarter 1 were 1.0% lower than in 2007 Quarter 4, according to the latest Halifax House Price Index. House prices in March were 1.1% higher than a year earlier.

As expected, there was a mixed regional picture. The biggest rises were in Greater London (1.6%), East Anglia (1.4%) and East Midlands (2.2%). There were price falls in a number of regions with the biggest falls in West Midlands (-5.0%) and Wales (-4.7%).

All 12 UK regions have experienced substantial house price rises over the last ten years, ranging from 146% in Scotland to 271% in Northern Ireland. Average prices increased by 191% in Greater London, 188% in Wales and 150% in West Midlands during the period.

Sound economic fundamentals are supporting house prices. A strong labour market, low interest rates and a shortage of new houses underpin housing valuations. Employment is at a record high and unemployment continues to fall. Employment stands at 29.5 million and has risen by 370,000 over the past year. Unemployment is below 800,000 and has fallen by over 125,000 in the last year. We expect there to be a modest rise in unemployment later in the year, but the scale of the increase is unlikely to cause widespread difficulties for households.

Commenting, Martin Ellis, chief economist, said: "Overall, we expect there to be a modest fall in UK house prices this year. Any declines, however, should be viewed in the context of the significant price rises over recent years. The average UK price has risen by £120,860 during the past decade from £70,696 to £191,556; an increase of 171%.

Sound economic fundamentals are supporting house prices. A strong labour market, low interest rates and a shortage of new houses underpin housing valuations. Our research shows that the labour market is the key driver of the housing market. Employment is at a record high and unemployment continues to fall."