Average UK house price falls by more than £6K

Experts warned there were likely to be more declines to come after September's 3.6% price fall, which was the biggest drop since Halifax first began compiling figures in 1983.

Halifax said prices were forced down by an increase in the number of properties on the market, combined with a drop in demand fuelled by uncertainty over the economy.

The fall wiped more than 6,000 off the average price of a UK house, at 162,096 last month.

The lender played down the significance of the drop, stressing it was too early to conclude that it represents the beginning of a sustained period of declining house prices.

But the figures sent shockwaves through the industry.

Shares in housebuilders, such as Barratt Developments, Persimmon and Taylor Wimpey, and lenders including Lloyds Banking Group and Royal Bank of Scotland, were all down after the figures were released.

Taylor Wimpey was one of the worst hit among the housebuilders, down 3%, while Halifax owner Lloyds Banking Group dropped 2% in the FTSE 100 Index.

Howard Archer, chief economist at IHS Global Insight, said the data was an "absolute shocker" and would "undoubtedly raise fears of a housing market crash".

But he added the month-on-month figures were highly volatile and that the fall was "partly a correction to the surprising rises reported in August and July".

He said: "Rather than crash, we expect house prices to trend down relatively gradually over the final months of 2010 and in 2011 to lose around 10% in value."

The September fall came after house prices rose 0.4% in August and 0.7% in July, according to recent Halifax figures.

However, its monthly data has contrasted with statistics reported by fellow lender Nationwide, which last week which said house prices edged ahead by 0.1% in September, following a 0.8% slide in August.

Although the monthly data differs significantly, the quarter-on-quarter decline for the two groups was exactly the same at 0.9%.

Paul Diggle, property expert at Capital Economics, said: "The hefty drop in the Halifax measure of house prices adds weight to the view that house price weakness is far from over."

While industry reports have been mixed, he said the Halifax result "adds weight to the argument that we are on the cusp of a more sustained downturn in house prices".

House prices still remain higher than a year ago - with prices in September up 2.6% on last year, the Halifax said.

There are hopes September's fall will give the market a boost, by tempting buyers back in while interest rates remain at historic lows.

Tim Hammond, chief executive of property search firm The Buying Agents, said: "There will be a lot of buyers out there who will see this as the window of opportunity they have been waiting for.

"For some time there has been a stand-off between sellers and buyers, with vendors reluctant to drop their prices and properties languishing on the market for months at unrealistic prices. Now at last, it seems we're starting to see the 'vendor freeze-up' thawing as those sellers in a position to discount their properties are making the decision to

do so."

But the Government spending review, together with renewed signs of a lending squeeze amid cash-strapped banks, casts a dark cloud over the outlook for property prices.

Bank of England industry-wide figures recently showed the number of mortgages approved for house purchase during August fell to 47,372, the lowest level in six months, and still well below the level that economists consider to be consistent with a stable market.