Homeowners received more bad news today with Government figures showing house prices fell by 1.6 per cent during February.
Annual house price growth also continued its downward spiral, falling to 6.7 per cent, its lowest level for 19 months, according to Communities and Local Government (CLG).
The figures came as data from the Royal Institution of Chartered Surveyors showed house price falls were gathering pace.
A record 78.5 per cent of surveyors reported a drop in the value of property during March, overtaking figures set during the 1990s house price crash.
The situation looks set to continue deteriorating with new buyer inquiries falling for the 16th month in a row during the month and at the fastest pace since March 2003.
CLG said February's fall in prices had been driven by a 2.9 per cent drop in the cost of flats, while detached and semi-detached homes lost 1.5 per cent of their value, the cost of terraced properties fell by 1.1 per cent and the price of bungalows was 0.6 per cent lower.
Flats are typically first-time buyer properties, and the fact that these saw the biggest fall suggests people taking their first step on to the property ladder are continuing to be hit by the credit crunch.
The average cost of a home in the UK stood at £217,737 at the end of February, its lowest level since June last year.
The Government figures showed that the annual rate of house price growth fell in 10 of the UK's 12 economic regions, with only the North West and West Midlands seeing a rise.
The most dramatic falls were in Northern Ireland, where annual house price inflation more than halved from 8.4 per cent to 3.7 per cent in the space of a month, and Wales where it dived from 7.4 per cent to 3.8 per cent.
Today's figures contribute to the build up of gloomy data on the housing market, with Britain's biggest mortgage lender Halifax last week saying house prices fell by 2.5 per cent in March - the biggest monthly fall since September 1992.
Howard Archer, chief UK and European economist at Global Insight, said: "The RICS survey in particular adds to the litany of worrying news on the housing market, and Global Insight now expects house prices to fall by 7 per cent in 2008 and 8 per cent in 2009.
"Furthermore, the recent escalation of the credit crunch and current rapidly deteriorating sentiment over the housing market heightens the risk that house prices could fall by 20 per cent or more over the next couple of years."
Ed Stansfield, property economist at Capital Economics, said: "The message from today's RICS housing market survey is clear - the downturn in the housing market is gathering pace as the credit squeeze reinforces the impact of the recent loss in buyer confidence on average house prices."
The group said there was little reason to be optimistic, as tighter lending criteria would continue to weigh heavily on buyer confidence.
It is expecting house prices to fall by between 10 per cent and 15 per cent during the coming two years.
The housing market has been coming under increasing pressure in recent months due to a combination of the problems in the mortgage market and stretched affordability following previous strong price growth.
The credit crunch has caused mortgage lenders to increase their rates and demand ever higher deposits from borrowers.
There is little sign that last week's interest rate cut has done much to ease the problems, with only a handful of lenders so far passing on the 0.25 per cent reduction to borrowers on their standard variable rate.
Among those who have not yet announced reductions is the recently nationalised Northern Rock, despite calls from the Prime Minister at the weekend for lenders to cut their rates in line with the Bank of England.
Gordon Brown held talks with bankers in Downing Street earlier today over how to minimise fallout from the credit crunch, and he is due to hold discussions with mortgage lenders next week.
Liberal Democrat Shadow Chancellor Vince Cable said: "It is clear that we are now seeing a major and long-overdue correction in the housing market.
"However, there is a real danger that with rising personal debt and high inflation, this correction may become a crash.
"The Government must act to ensure that we do not end up with mass repossessions, which will only worsen a housing crash."
But the Government insisted the fundamentals underpinning the housing market remained sound, with high employment and relatively low interest rates.
A CLG spokesman said: "It's important to recognise we are dealing with a different situation in the market from what was experienced in the early 90s.
"Today the issue affecting the market is credit supply, then it was high unemployment and high interest rates, which is why no serious commentators are making comparisons with those times."Reuse content