This continues the slight decline on this measure since last spring. The pace at which prices are falling, however, remains markedly lower than during the second half of 2008 when quarterly declines of 5-6% were recorded.
On an annual basis, prices in January were 2.4% lower as measured by the average for the latest three months against the same period a year earlier, according to Halifax.
There are, however, fewer properties coming onto the market for sale. The latest RICS survey, for example, reported a decline in new seller instructions for the third successive month in December. The Halifax said that a continuation of this trend would help to reduce the imbalance between demand and supply and support house prices.
Commenting, Martin Ellis, housing economist, said: "Prices in the latest three months were 0.7% lower than in the previous quarter, continuing the slight downward trend on this underlying measure. House prices increased by 0.8% between December and January.
"We expect limited movement in house prices overall this year. There are, however, likely to be some monthly fluctuations with the risks on the downside. The prospects for the market in 2011 are closely aligned with the performance of the wider economy. Consumer confidence has fallen recently, partly as a result of nervousness about the economic outlook.
"On a positive note, there have been further signs that the recent downward trend in prices is causing homeowners to be more reluctant to put their properties on the market. This development should help to relieve downward pressures on prices as long as it is sustained.
“We also expect interest rates to remain very low for some time, supporting a favourable affordability position for many existing mortgage borrowers and those entering the market.”
Commenting, James Green, senior partner, property consultancy, Stags, said: "January was a fluctuating month. It started off very quietly but things improved towards the end of the month, and instruction levels were relatively strong.
"Yes, there is uncertainty around the economy but we're finding that the people who are viewing are extremely motivated about buying and are transacting very quickly if they find a property at the right price.
"In 2011, we expect house prices to remain static and transaction levels to broadly mirror that of 2010. There are going to be ups and downs but generally speaking they will cancel each other out.
"As ever, quality properties in desirable areas can still command strong prices, at or around guide."
Mark Blackwell, managing director of property data conduit xit2 said: “The Halifax index is working with a small sample taken from a tiny market. There were less than 40,000 transactions in January and that means none of the usual indexes are as reliable as they should be. They’re just too volatile to draw meaningful conclusions from monthly statistics.
“Having said that, it’s clear the housing market is bumbling along at the moment - and it looks as if prices aren’t going to rise any time soon.
“Prices are threatened from a potential hike in the Bank Rate this spring. Not only would that punish existing owner, it would also land a savage psychological blow on potential buyers.”
