Economists polled by Reuters had expected house prices to rise in March from February.
The average price of a residential property across the UK dropped by 0.3% in March, marking the first decline since June 2015, fresh figures from the Nationwide has revealed.
This is the largest property price fall for almost five years, providing further evidence of the increasing squeeze on consumers.
Howard Archer, chief UK economist at IHS Global Insight, said that the building society’s latest data “fuels our belief that the housing market is being increasingly affected by the increasing squeeze on consumers and their concerns over the outlook”.
Despite the month-on-month fall in house prices, home prices were up 3.5% in March from a year earlier, but this was down from an annual rate of 4.5% in February.
Economists surveyed by Reuters had expected home prices to increase by 0.4% in March from February and annual growth of 4.1%.
The average UK house price is now £207,308, Nationwide said.
Robert Gardner, Nationwide’s chief economist, commented: “The South of England continued to see slightly stronger price growth than the North of England, but there was a further narrowing in the differential.
“Northern Ireland saw a slight pickup in annual house price growth, while conditions remained relatively subdued in Scotland and Wales.”