This resulted in a HPSI reading of 45.0, down from 46.8 in September and the second lowest reading since February.
Any figure under 50 indicates that prices are falling, and the lower the figure, the steeper the decline. Any figure over 50 indicates that prices are rising.
The survey of 1,500 households across the UK showed that households in every region felt the value of their home fell over the last month.
Even Londoners reported price falls (49.5), the first time this has happened since February this year. Prices fell most in the North West (40.5) and East Midlands (40.5) according to residents.
The future HPSI which measures what households think will happen to the value of their property over the next year, fell in October.
Around 24% of households anticipate a rise in the value of their home over the next 12 months, while 23% expect a fall.
The resulting index reading is 50.5, down from September’s reading of 53.2 and marking the sharpest fall in the future price index for a year.
Expectations for house price rises were recorded in only 3 of the 11 regions in October.
This marks a dramatic departure from the trend seen throughout the spring and summer months when an average of six regions forecast that house prices would rise.
In another change, London (59.8) has been overtaken by the South East (60.8) in terms of the scale of house price growth expected for the first time since October 2010.
Households in both regions are still expecting a healthy rise in prices over the next year, but the future HPSI reading for London is the lowest since January this year.
The only other region expecting price rises is the West Midlands (53.2) with the highest reading in more than a year.
Households in the North West (42.1) are the least optimistic about prices. In fact, this is the lowest reading since May last year, although households in the region have been forecasting house price falls for the past six months.
Gráinne Gilmore, head of UK residential research at Knight Frank, said:
“The summer ‘feel-good’ factor has ended with a bump. There have been glimmers of good economic news over the past few months, but these have been rather overshadowed by party political conferences which have focused closely on the difficult economic climate.
“In addition, the International Monetary Fund (IMF) dramatically revised down its forecasts for the UK economy this month, denting confidence that the current fiscal austerity plans will be enough to deliver convincing growth.
“This downturn in economic sentiment has been reflected in the house price sentiment index. Households in London and South East as ever remain most positive about the outlook for prices, but it is interesting to note that even Londoners’ expectations have lessened in terms of the price increases expected, with the second lowest future HPSI reading since the start of the year.”
Chris Williamson, chief economist at Markit, said:
“The drop in sentiment about house prices over the coming year is a surprise, and suggests that the Government’s Funding for Lending Scheme, which – according to the lenders – reportedly resulted in a marked increase in the availability of finance for mortgages in the third quarter, has yet to filter down to improved optimism about the housing market. Instead, it seems that people have become more nervous about the economic and housing market outlooks for the coming year.
“Once again, the economic recovery appears to be missing the vital ingredient of confidence. The future outlook is clouded by confusion over the current health of the economy and the appropriate policy response, as well as worries about the impact of austerity and the eurozone’s crisis.”
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