House prices will continue to fall this year, say experts

Experts believe house prices are cooling significantly

Figures released by Halifax show that the average cost of a home in the UK was unchanged at £197,244 in January.

But annual house price inflation fell to 4.5 per cent for the year to the end of last month.

This is the lowest figure since November 2005 and down on the previous month's figure of 5.2 per cent.

Experts believe the pause in price falls last month will not last and that they will continue to drop as the year progresses.

Ed Stansfield, property economist at Capital Economics, said: "The falls in house prices that got under way in the final quarter of 2007 stalled over the turn of the year, at least according to the Halifax.

"But with affordability pressures still elevated and tighter lending criteria likely to curtail prospective home-buyers' purchasing power, we do not expect this pause to be prolonged.

"Further falls in house prices are more likely than not over the rest of 2008."

Howard Archer, chief UK and European economist at Global Insight, said: "The Halifax and Nationwide data indicate that, while house prices are cooling significantly, they are currently not plunging through the floor.

"Nevertheless, the housing market is clearly buckling under substantial pressure from increased affordability constraints and tightening lending practices."