House prices in England and Wales fell at their fastest annual rate in more than a year last month, although a rebound in new buyers slowed the fall on the month.

Property data firm Hometrack said prices fell 0.2 per cent in February, the smallest monthly decline since July, after a drop of 0.5 per cent in January.

However, the data are not adjusted for seasonal fluctuations, and Hometrack said the improvement could be due to a mix of seasonal factors and pent-up demand after weakness at the end of 2010.

Indeed, on an annual basis, house prices fell 2.7 per cent last month - the biggest fall since November 2009, after a 2.2 per cent annual decline in January, suggesting that underlying conditions on the housing market remain weak.

Official data earlier this week showed net mortgage lending picked up to its highest in almost a year in January after a fall in December, but mortgage approvals are still running at only half their long-run average. Surveys from mortgage lenders Nationwide and Halifax have both shown house prices falling on an annual basis for some months, and most economists expect prices to fall slightly this year.

Hometrack said there was a 7.5 per cent rise in the number of homes put up for sale in February - the biggest increase in three years. But estate agents reported a 14.7 per cent increase in people registering an interest to buy. There was a 25.4 per cent rise in the number of sales agreed.

"Lower price falls will be sustained if demand for housing continues to grow in the coming months," said Hometrack director of research Richard Donnell.

"The reality is that the outlook for the market remains finely balanced."

Reuters