Prices in London and the South East, which have previously been immune from price falls in other parts of the country, have also gone into reverse.
The figures also show the number of buyers looking for a property fell by 2.9% in September- the third month in a row that has seen a reduction.
Richard Donnell director of research at Hometrack, said: "The market is now entering the second phase of the re-pricing process as a response to falls in both sales volumes and demand. Over the rest of the year and into early 2011, agents will start to focus on re-pricing the property on their books to a level where transactions volumes are maintained. Talk of a double dip, with the implication being that the market will see double digit house price falls, is over-done despite the weak outlook for demand. We expect a slowdown in the volume of homes coming to the market to limit the scale of absolute price falls over the next 12 months.
"Over the last six months the supply of homes for sale has grown by 16% while demand has fallen by 1.6%. The latest survey highlights a 2.9% decline in demand – the largest monthly fall since January 2009. Growing concerns over the economic outlook and public spending cuts are weighing heavily on would-be purchasers.
"The decline in demand has accelerated over the last three months compared to the previous quarter. Anecdotally agents report that there are fewer purchasers and that those purchasers looking to buy are both cautious and choosy – the return to a buyer’s market seems inevitable in the coming months although the majority of vendors do not have to sell."
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