The average price of a new home rose by 1.1% in December 2009, bringing the total annual change for the year to just -2.6%.
The cost of the average new home now stands at £220,537.
The market has made a strong recovery from the trough in May 2009 when new home prices had fallen by -15.3% annually.
David Bexon, Managing Director of SmartNewHomes.com said: "The new homes market ended the year on a very encouraging note, with the annual decline in new home prices reducing for the seventh consecutive month.
"Many housebuilders are beginning to talk positively about growth in the first half of 2010 with plans to reopen mothballed sites and a renewed thirst for land acquisition. Others are acquiring small housebuilders who have strong portfolios of half finished developments or stocks of prime land banks. Rising share prices and rights issues are also offering a ray of hope for a modest improvement to UK homebuilding for this year.
"All this bodes well for an increase in stock towards the middle of the year but no one is suggesting that the new homes market is close to recovery any time soon. NHBC figures show that just over 88,000 new starts were recorded in 2009 - the lowest level since the 1950s.
"While schemes such as Kickstart and Homebuy Direct have provided the biggest cash injection ever into the sector they do not translate into volume building. Now more than ever government funding is crucial to the future of housebuilding in the UK. The political parties may have started their campaigning but appear to be silent or afraid to commit to any concrete housing policies. A raft of cuts in public spending is inevitable, whichever party wins the next election, but they must not be made at the expense of a housing market recovery."
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