House prices fall 6.1% over year

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The average property price dropped by 2% during June, following a slide of 2.5% in May, to stand at £180,344, according to Halifax.

The annual rate at which prices are falling continued to accelerate during the month, increasing to 6.1%, the highest level since March 1993 and up from 3.8% in May. House prices have now fallen by a total of 8.9% so far this year, dropping in eight of the past 10 months.

Halifax said the average home now costs the same as in August 2006, although prices are still 2% higher than two years ago and 40% higher than five years ago.

The figures are in line with those reported by Nationwide Building Society last week, which showed that house prices fell for the eighth month in a row during June, dropping by 0.9%. At the same time annual house price growth fell to minus 6.3%, the lowest level since December 1992.

All the major house price indexes are now showing falls, with economists predicting prices will drop by up to 12% this year.

But despite the current turmoil, Halifax said the housing market continued to be underpinned by strong fundamentals. It said price falls were being driven by affordability problems due to rapid house price growth in recent years, combined with a squeeze on consumers' spending power and the problems people were having getting mortgages as a result of the credit crunch.

But it said employment levels remained high, interest rates were low and the shortage of new homes being built would support valuations. The group added that the drop in prices of 2% during June was a "slight moderation" from the fall of 2.5% in May.