House prices fell by 0.2% between April and May as prices dipped by 0.5% on a quarterly basis, according to the latest house price index from the Halifax.
However, house prices in May were still up 2.6% on the same month in 2019.
Russell Galley, managing director, Halifax, said: “With the full impact of lockdown measures taking a firm grip on the UK property market by May, the average house price fell by 0.2% to £237,808.
“This is the third successive monthly fall, though more modest than in April, and reflects a continued loss of momentum following what was a strong start to the year.
‘Though it should still be noted that with a limited number of transactions available, calculating average house prices remains challenging and increased volatility is to be expected.
“The mid-month relaxation of restrictions in England, allowing estate agents and conveyancers to restart operations, brought much-needed positive news with some advance indicators of buyer and seller interest quickly showing signs of improvement.
“This is likely to provide a short-term boost as buyers and homeowners attempt to kick-start transactions that had previously been put on hold.
“Looking ahead, we expect market activity to increase progressively as restrictions are eased further across the whole of the UK and we continue to have confidence in the underlying health of the housing market over the long-term.
“However, the extent of downward pressure on market confidence and prices over the coming months will depend on how quickly the economy is able to recover from the effects of the pandemic and the available government policy support for jobs and households.”
Shaun Church, director at mortgage broker Private Finance, added: “Lockdown’s strict measures have caused activity in the housing market to seize up, resulting in a momentary dip in pricing.
“Buyers are worried their financial position might deteriorate in the future. As a result, they’re pulling back from the market.
“Growing job insecurity and sharp reductions in income due to a drop in working hours or enforced salary cuts has left some consumers under intense financial strain. This has resulted in buyers delaying purchases until they have clearer visibility over the next year.
“Low transaction levels* may offer buyers an opportunity to negotiate on price, which could be partly reflected in last month’s fall.
“However, since the easing of lockdown in England, we have experienced a sudden uptick in enquiries. This suggests the market’s bounce back is underway, driven by a swift release of pent-up demand.
“The disruption caused by the pandemic has added complexity to many activities. This could result in an increase in buyers and sellers seeking expert advice to help navigate the complicated sales process as we enter the post-coronavirus economy.
“As lenders return to the market and offer higher LTVs, buyers may be encouraged to pick up their property searches again and push on with purchases.
“Higher LTVs are also offering a route to entry for first time buyers again, which will give sellers access to a larger pool of consumers.”