Prices stood at £164,122 on average in the 12 months to July, an annual drop of 1.5 per cent, the latest Scottish house price monitor from Lloyds TSB Scotland shows.
The final quarter of the year showed prices rose on average by 7.3 per cent, but with variation across the country.
Transactions increased by 37 per cent when compared to the previous quarter and by 29 per cent compared to the same quarter a year ago.
Donald MacRae, chief economist at the bank, said: “The Scottish housing market had adjusted to the recession with a halving of sales and a period of price volatility.
“However, these latest monitor results show a pick-up in both activity and prices.
“Average house prices are now 95 per cent of their peak of four years ago.
“Although consumer confidence has become less negative during the first six months of the year, it still remains low, with retail price inflation in excess of average increase in earnings continuing to squeeze disposable income.
“The rate of increase in consumer spending remains modest.
“The largest pick-up in the market is at the higher value end, with the number of transactions for detached properties in the monitor increasing by 47 per cent compared to the same quarter one year ago.
“While all property types are showing a quarterly price gain, the average prices of flats has increased the least.”
In the past year, prices in Aberdeen fell furthest by 9.9 per cent to £211,917.
Prices in the rest of the north of Scotland increased the most by 3.2 per cent to £182,995.
Prices in Edinburgh fell on average by 7.1 per cent but remained most expensive at £291,430 on average.