Fall in house prices is confirmed

"The current issue affecting the market is largely about the supply of credit - a very different situation to the early 1990s which was about high interest rates and unemployment," said a DCLG spokesman.

Completions

The DCLG survey, based on completed sales, shows that prices have now dropped for the ninth month in a row, which has taken the average UK property price down to £217,171.

However the picture is not uniform across the country.

Prices are down by 0.3% in England, 0.8% in Wales and 10.3% in Northern Ireland.

But in Scotland prices have risen by 3.6% over the past year.

Surveys from lenders such as the Halifax and the Nationwide have suggested that the fall in prices, in the year to August, has been much steeper than that recorded by the DCLG.

That may be due to different methodologies used in their surveys.

The lenders base their figures on prices quoted when they approve their mortgage loans.

Whereas the DCLG's survey is calculated by using completions, based on a survey of about 50,000 sales from 60 mortgage providers, a month behind the lenders.

Gloomy predictions

Economists said that because of this lag, the government's own figures may get worse.

Seema Shah, at Capital Economics, said that with "other more timely measures of house prices weakening drastically in the past few months, and with the economy heading for recession, those falls are likely to intensify over the coming months".

Analysts agree that the housing market has undergone a very severe and sudden contraction after more than a decade of steeply rising prices.

Sales are down by about 50% in the past year; mortgage approvals are down by more than 70% suggesting that sales have further to fall; and last week estate agents reported that in the three months to August, some of them were selling fewer than one property per week.

The head of the Nationwide building society, Graham Beale, has said that house prices might end up falling by as much as 25% from their peak seen in Autumn 2007.

And Andy Hornby, the chief executive of HBOS, which owns the UK's biggest mortgage lender the Halifax, has predicted that the credit crunch that is restricting lending would last well into next year.