The latest national housing market survey from Hometrack showed that average property prices felly by -8.1% over the last 12 months with average values back to a level not seen since January 2006. Average prices were down across 70% of the country.

Richard Donnell, director of research at Hometrack, said: “All the indicators from the latest survey point to a continued fall in property prices in the short term. A weak economic outlook and limited availability of mortgages are set to keep prices under downward pressure in 2009. Despite this, transaction volumes may be close to bottoming out. The market has been stripped back to the bare bones and now comprises just a relatively small number of committed buyers able to access finance, and needs-based sellers who are having to become more realistic on pricing.

“The real problem for the housing market remains on the demand side. The stimulus package announced in the Pre-Budget Report is likely to have little direct impact on the housing market in the short run, and, despite the -1.5% cut in base rates earlier this month, mortgage rates remain relatively high. More importantly the constrained availability of finance, particularly for those looking to move home and borrow in excess of 75% of the value of a property continues to act as a drag on demand.”

However, there are continued signs that those looking to sell are becoming more realistic on pricing. The downward pressure on pricing is highlighted by the ongoing decline in the proportion of the asking price being achieved which stands at 88.9% although the rate of decline has started to slow.

While overall market conditions remain weak there are hundreds of individual housing markets each performing differently and influenced by a combination of national and local factors. For example, two fifths of postcodes in Wales have an average time to sell in excess of three months compared to just 10% in the South East.

A similar pattern emerges when looking at concentrations of areas where the average proportion of the asking price being achieved is lower than 85% (22% of postcodes in Wales fall into this category followed by 14% in the North East and just 4% in London). All these trends reflect the relative supply-demand balance within local housing markets and buying power of households which is linked to the structure of local economies.

On a regional basis the largest falls over the last year have been seen in London (-9.5%) and East Anglia (-9%) where prices have fallen off a high base.

Donnell concluded: “Based on an analysis of recent changes in the supply of and demand for property on a regional level, it is clear that the greatest mismatch is in London and the South East. As a result we expect prices in these regions to remain under greatest downward pressure in the short term.”