Average house prices in England and Wales fell by 0.4% during December, according to research from the Land Registry, although the overall annual house price change remained 6.7% up at £184,469.The largest falls were recorded in the East Midlands, which saw prices decline 3.3%, Wales, which fell 2.1% and the South-East which was down 1.2% in December. London still saw an increase in average price of 0.6% with annual growth in the capital now standing at 14.3% by the end of 2007.

The lower end of the market was most affected, with sales volumes falling sharply, while the £2m+ market saw more transactions take place between October and December than in the previous year.

Seema Shah from economists Capital Economics said: ‘According to the Land Registry, house prices fell by 0.4% in December. As well as being the first monthly fall since August 2005, it is the largest decline recorded on this index since it began in 2000. What’s more, with buyer interest still falling and mortgage demand continuing to weaken, it certainly looks like more house price falls are on their way.’