House prices fell in May as a faltering economy, pressure on household budgets and the prospect of interest rate rises dogged the market.
Figures from Nationwide show prices declined by 0.2% month-on-month, the third fall in four months. On an annual basis, price growth slowed to 2.4% from 2.6% in April.
Robert Gardner, the building society’s chief economist, said: “There are few signs of an imminent change. Surveyors continue to report subdued levels of new buyer inquiries, while the supply of properties on the market remains more of a trickle than a torrent.
“Looking further ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates.
“Subdued economic activity and ongoing pressure on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year, though borrowing costs are likely to remain low.”
The average house price was £213,618 in May – when not seasonally adjusted – up from £213,000 in April.
Nationwide’s figures chime with official data that points to a slowing market, driven by London.
Recent figures from the Office for National Statistics shows British house prices slid in March, with the capital recording its weakest performance since 2009.
The statistics body said the decline in London could be linked to changes to stamp duty, and the Brexit vote, which has deterred foreign buyers and led to a fall in net migration to the city.
Howard Archer, the chief economic adviser at EY Item Club, said: “The housing market is clearly struggling to gain traction and we suspect that any meaningful upturn will remain elusive over the coming months.
“The fundamentals for house buyers are likely to remain challenging. Consumers have faced an extended serious squeeze on purchasing power, which is only gradually easing.
“Additionally, housing market activity remains hampered by relatively fragile consumer confidence and limited willingness to engage in major transactions.”