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House prices dropped by an average 8.7% in 2008 and are set to fall by another 12% next year, property information firm Hometrack said yesterday.
Homes in the south-east, East Anglia and London have been hit hardest this year, according to a survey of 1,800 estate agents and surveyors in the UK.
A 0.9% monthly decline in December, compared to a 1.1% fall in November provided some hope that the housing market could be reaching a bottom, but Hometrack's director, Richard Donnell, said further price drops were to be expected as rising unemployment forces more sellers into the market.
"The onset of recession and the prospect of rising unemployment over 2009 will continue to dampen confidence and in turn demand which will inevitably lead to further house price falls over the next 12 months," he said.
Melanie Bien, director of mortgage brokers Savills Private Finance, said her company measured the drop in house prices in 2008 at closer to 12% and expected prices to fall by another 11% in the new year.
"The pace of price drops is slowing, but we are still some way off the bottom. The market is only going to pick up when people believe we have hit the bottom - and unfortunately we are not there yet."
Property prices in London fell by the biggest margin - 10.1% - reflecting a fall in demand for properties in the capital and the south-east despite a continuing shortage of housing in the region. Prices in the north-east were down by 6.5% - with average drops of 6.6% in Yorkshire and Humberside.
House sellers are also having to wait much longer to sell their properties than at the height of the housing boom, with research revealing a 45% drop in sales volume this year.
With banks less willing to lend and negative news about the economy, Hometrack predicts that households will move on average only every 31 years, double the average of the last decade.
In December it took twice as long - 12 weeks - to sell a property than at the peak of the housing boom in April 2007, with 88.6% of sellers achieving their asking price, compared to 95.7% in April 2007.
In some parts of the country, one in four properties have been on the market for the whole of 2008, according to property search engine Globrix. The group said 26% of properties in Rochdale, Lancashire, 23% of homes in Aberystwyth in Wales and 20% in Swanage in Dorset had been on the market since January, but the north of England had been particularly hard hit, accounting for eight of the top ten towns worst affected by the stagnation.
Cities have generally seen less stagnation, with only 5% of homes in London not sold after a year, and 6% in Birmingham.
Daniel Lee, chief executive of Globrix, said: "Fortunately, in the past few weeks there have been signs that sellers are starting to accept that they need to drop their prices if they are going to attract buyers."
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