It's official - UK house prices are falling except in London » Housing » 24dash.com

Figures from the Land Registry today showed the first annual falls in house prices since the agency's monthly records began more than seven years ago.

Average house prices in England and Wales fell 2% to £178,364 during the 12 months to July, the government body said. It is the first time the series has recorded an annual drop since April 2000.

June's data which initially showed a 0.1% average rise during the past year has also been revised down to a drop of 0.6%, the Land Registry said.

Last month's fall is well down on the double digit declines recorded by the likes of Nationwide Building Society, which yesterday said house prices were 10.5% lower this month than a year ago based on mortgage information from its customers.

But the Land Registry believes its survey, which is based on all housing transactions in England and Wales and therefore lags slightly, is more authoritative. Prior to 2000, the agency recorded property prices on a quarterly basis going back to 1995.

Its latest data showed average prices fell 0.6% between June and July, the sixth consecutive monthly decrease.

All regions bar London saw prices fall in July on an annual basis.

London prices rose 1.7% thanks to bigger hikes in more affluent boroughs like Westminster and Kensington and Chelsea.

The East Midlands saw the biggest yearly drop, down 5.1%, followed by Wales where prices were 4.4% lower.

Detached houses appeared to be faring worst, with prices dropping 2.3% on average. Semis, terraced houses and flats were all 2% lower.

The figures also showed that the number of homes changing hands had fallen sharply during the past year, with transaction volumes for May - the most up-to-date figure available - 43% lower than 12 months earlier at 61,038. London saw a slightly bigger drop of 46% to 7,240 in May.

The rate of decline in housing transactions was more severe than during April, when 39% fewer properties changed hands than during the same month of 2007.

Seema Shah, property economist at Capital Economics, warned of more gloomy data to come.

She said: "Buyer confidence, already reeling from the fall-out of the mortgage credit squeeze, is likely to be further depressed as the economy heads for recession. This will represent another huge blow to the housing market."

Liberal Democrat Shadow Chancellor, Vince Cable said: “The housing market is clearly in freefall.

“Although painful, this correction in house prices is necessary to redress the bubble-fuelled increases of recent years.

“Hundreds of thousands of people are facing negative equity, twinned with the squeeze of rocketing energy and food costs.

“With repossessions already soaring it is essential that the Government acts to prevent the widespread homelessness last seen in the Tory recession of the 1990s.”