The average cost of a home in England and Wales dropped by 0.4 per cent during the month, according to housing intelligence group Hometrack.
The drop was driven by the ongoing shortage of buyers, with estate agents reporting a further 4.8 per cent fall in the number of people registering with them in December, the sixth consecutive monthly decline.
Richard Donnell, director of research at Hometrack, said: "The seasonal slowdown which began at the beginning of November continued apace into Dec- ember."
Overall, the group said house prices had fallen by 1.6 per cent during 2010, with property values ending the year at a lower level than they started it in 71 per cent of England and Wales, although they were higher in 15 per cent of areas, mainly in London and the South East.
However, on a brighter note the number of homes being put up for sale dropped for the second month in a row during December, falling by 1.5 per cent.