House prices fall 2.6% year-on-year

Average house prices in September dropped 2.6% year-on-year, with the average house price in England and Wales now £162,109, according to the Land Registry.

Its figures showed that house prices fell 0.3% in September compared to August, which also saw a drop of 0.1%.

The Land Registry found that the only region of England and Wales to see an increase in average property values over the last 12 months was London, up 2.7%. Meanwhile, the North West saw the highest monthly increase of 1.0%.

By comparison, the North East suffered the greatest annual decline in prices, down 8.2% in September, as well as the highest monthly movement, down 3.9%.

In addition, the Land Registry's most recent figures showed that house sales in July fell 11% to 59,919 compared to 67,475 in July 2010.

Sales of high value properties worth more than £1m also showed a significant drop, down 24% year-on-year to 707 in July 2011.

Peter Maskell, director of estate agents Brock Taylor, said that the key reason behind drifting house prices is that the market is becoming polarised between "must-sell" vendors pricing aggressively and the rest.

He said: "Many will be motivated by the "three ds" - death, divorce or debt in the family. Their desire for a quick sale will often force them to set prices low.

"Sellers who put a property on the market a while ago and who still hope for a better price are seeing them stay on the shelf much longer - sometimes for many months."

In addition, Derek Richardson, managing director of Squarefoot Estate Agents, said that it has seen nearly a third of its agreed sales fall through as buyers struggle to get mortgages.

He added: "Looking forward, we do not expect any significant uptick in the property market until at least February."