House prices fell by 3.4pc during 2010

The average cost of a home ended the year at 162,435 as buyers stayed away from the market, said Halifax.

Annual house price inflation – which compares average prices during the three months to the end of December with the same period a year earlier – was running at minus 1.6 per cent, its lowest level since November 2009.

A straight year-on-year comparison showed prices were 3.4 per cent lower during December than they had been at the end of 2009.

Halifax housing economist Martin Ellis said: "Looking forward, we expect limited movement in house prices during 2011 but with the risks on the downside.

"Current signs that homeowners are becoming more reluctant to sell would, if continued, help reverse the imbalance between buyers and sellers."