House prices fell by 0.7% during October as buyers continued to stay away from the market, figures by Nationwide Building Society showed today.

The average cost of a home in the UK dropped by nearly £2,400 to £164,381 during the month, as the downward trend in prices seen since the start of the summer continued.

House prices have either fallen or remained static in every month since the end of May, with the drops seen during 2010 nearly wiping out the increases that occurred during the early part of the year.

The quarter-on-quarter change to house prices, which is generally seen as a smoother indicator of market trends, also showed that the rate at which property values are falling has accelerated.

House prices dipped by 1.5% during the three months to the end of October, compared with a 1% slide during the quarter to the end of September.

Nationwide says this was the biggest fall since April 2009, although it remains well down on the quarterly drops of 5% and 6% recorded during the second half of 2008.

Buyers want to 'wait and see'

The annual rate of house price growth also declined for the sixth consecutive month, falling to just 1.4% - less than half the 3.4% recorded during the previous month.

Martin Gahbauer, Nationwide's chief economist, says: "If the recent trend in house prices were to continue through November and December, the annual rate of house price inflation would drop to between 0% and minus 1% by the end of 2010. This would compare to a rate of 5.9% at the end of 2009."

House prices have come under increasing pressures in recent months as potential buyers have adopted a 'wait and see' approach until the outlook for both the housing market and the wider economy becomes clearer.

But sellers have continued to return to the market, creating a mismatch between supply and demand and giving buyers the upper hand in price negotiations.

Mortgage lending also remains tight, preventing many people who want to press ahead with a move from doing so.

It remains to be seen what impact the spending cuts announced in the Comprehensive Spending Review will have on the property market, but public sector job cuts could put further pressure on prices in some areas of the country.

Halifax reported that house prices fell by a record 3.6% during September, although the group had reported price rises during the two previous months, when Nationwide recorded a fall.

Figures from the British Bankers' Association released earlier this week showed that net mortgage lending, which strips out redemptions and repayments, has slumped to its lowest level for a decade, as activity in the housing market remained muted.

Further reading/Key links

Valuation Loophole: Free House Price Valuation
Cut home loan debt: The Free Remortgage Guide, The Free Mortgage Guide
Latest House Prices: Nationwide, Land Registry, Halifax