Prices of homes ‘to see slight decline in 2013’

Prices fell 0.1pc month-on-month in December, marking the sixth month in a row that this has happened, and average prices ended the year 0.3pc lower than a year ago, Hometrack said.

It predicts that a reluctance by struggling families to take on more debt will continue to act as a drag on the housing market next year and prices will be more volatile with continued low sales.

Hometrack’s monthly figures for December show prices were flat in London and East Anglia, fell 0.1pc in the Midlands, the South and Yorkshire and the Humber, dropped 0.2pc in the North West and Wales and by 0.3pc in the North East.

One postcode in five in England and Wales recorded price increases over the past year but prices have fallen across two-thirds of the country. London has had strong demand from wealthy overseas buyers and consistently outperforms other regions, seeing prices rise in seven out of 10 postcodes this year.

Property prices are now 10 pc higher than at the peak of the market in 2007. But price growth in London, vital to keeping average prices up in the rest of the country, is predicted to slow next year, with a two pc annual increase pencilled in.

Richard Donnell, director of research at Hometrack, said: “Affordability constraints and a general unwillingness by households to take on debt will continue to act as a drag on the housing market in 2013, at least until such time as the economic outlook sees a clear improvement.

“Hometrack forecasts that average prices will remain under slow downward pressure, falling by one pc in the 12 months to December 2013 against a backdrop of continued low turnover and greater price volatility.”

Around 912,000 sales should take place next year, well below the Council of Mortgage Lenders’ forecast that transactions will pick up to around 950,000, Hometrack said.

Halifax has said house prices are likely to be flat next year, with any growth likely to be strongest in London and the South East.