UK house prices slipped by a further 2.2% in December to their lowest point since August 2004, according to research from Halifax.
The average price of a house fell to £159,896 compared with £197,039 in December 2007, said the mortgage lender’s house price index.
But Halifax also said the further drops will be accompanied by increased demand from new buyers.
‘Continuing pressures on incomes and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are expected to exert further downward pressure on the market over the coming months,’ said Halifax chief economist Martin Ellis.
‘But a number of factors will help to support demand and should help to limit the downturn.
‘Improving housing affordability and an easing in the pressure on the majority of households' finances should support market activity and prices.’
Halifax said the average house price is now 4.4 times more than the average earnings – its lowest level for five and a half years.
In July 2007 the average house was 5.84 times more expensive than the average amount earned. The long term average is a ratio of 4.
Halifax also said that in November estate agents reported the first rise in new buyer enquiries since October 2006.