The average price of a UK home fell by 1.4% in January to £208,552 according to the Department for Communities and Local Government (DCLG).
The annual rate of house price inflation dipped to 0.5% in January, compared to 3.8% in December and a peak of 10.6% in May 2010, according to the DCLG house price index. It was the eighth consecutive month during which the annual rate of house price inflation has fallen.
Negative housing market data was also announced by the Financial Services Authority (FSA), which showed new loans to borrowers reached £37bn in the fourth quarter of 2010 – a drop of 10% compared to the previous quarter and an 11% fall compared to the final quarter of 2009.
The FSA said the number of new arrears cases increased in the final three months of last year to 38,800 – 6% higher than the previous quarter but still 5% below the 40,900 cases in the fourth quarter of 2009 . The total number of accounts in arrears at the end of 2010 was 343,400, unchanged from last quarter.
The DCLG added that average house prices increased by 1.0% in England in the year to January, but decreased by 1.8% in Wales and fell by 3.2% in Scotland and 14.1% in Northern Ireland. It takes the average price of a home to £216,304 in England, £147,862 in Northern Ireland, £165,078 in Scotland and £145,744 in Wales.
House prices increased in five of the nine English regions during the year to January 2011. The largest increase was in the east (4.0%) and the smallest was in the south east (0.6%). Yorkshire and the Humber saw the largest annual fall of 4.6%, while Scotland and the West Midlands both recorded a 3.2% fall.
DCLG also said the average price for properties bought by first time buyers increased by 1.5% to £153,608 over the year to January , compared to an annual increase of 1.4% in December. During January alone, prices paid by first time buyers increased by 0.7%, compared to a 0.5% monthly increase in January last year.
Housing experts said the DCLG data, based on mortgage completions figures collected by the Council of Mortgage Lenders (CML), further reinforced their belief that the housing market is weakening. The CML data last week showed a 29% drop in house sales in January compared to December.
Nicholas Ayre of property search agent Home Fusion, said: "The 1.4% decline in January does seem indicative of the direction house prices will go during 2011, namely down. At best, the market will remain flat this year, at worst it is heading for further falls, especially in areas where unemployment is rising sharply.
"In the property market, the negatives outweigh the positives and in some areas, especially those overly reliant on public sector jobs, there are very few positives. Supply has slowed in recent weeks, easing the pressure on prices, but this could change rapidly when interest rates rise. This week's unemployment data will also have a bearing on consumer confidence and therefore the demand for property.
"As ever, there is a split in the market between the top end, where demand is still strong and mortgage finance achievable, and the lower end, where demand is weak and mortgage finance very difficult to secure."
Howard Archer, chief UK and European economist at IHS Global Insight, said the figures were "fully consistent" with his view that house prices will continue to trend down in 2011 after losing ground overall in the latter months of 2010. "Specifically, we suspect that house prices will fall by around 5% in 2011 and end up losing around 10% from the peak levels seen in the first half of 2010," he said.
"We believe that the fundamentals remain largely unfavourable for the housing market, even though fewer houses recently coming on to the market could provide significant support for house prices if sustained. Even then this is likely to be countered by the ongoing low housing market activity reflecting the pressure on buyers."
The FSA said fixed-rate products increased in popularity throughout the year, accounting for 46% of new mortgages by the final quarter of 2010 compared to 36% in the first quarter.
