The underlying trend has turned negative for the first time since June according to the latest Halifax House Price Index.
The Index shows that on a monthly basis house prices increased by 1.2% in October. This continues the highly mixed pattern of monthly price movements this year. There have been five monthly rises, four falls and one month of no change.
The average UK house price in October was marginally higher than at the end of last year. The average price in October was £508 (or +0.3%) higher than in December 2010 on a seasonally adjusted basis, at £163,311.
Annually, prices in October were 1.8% lower as measured by the average for the three months to October against the same period a year earlier.
This is the lowest annual fall since December 2010 (-1.6%) and continues the improvement since May when prices were 4.2% lower.
Property sales have stayed within a narrow range around 70,000 per month so far this year, according to HMRC figures.
The industry-wide number of mortgages approved to finance house purchase - a leading indicator of completed house sales – has, however, nudged higher in recent months. There was an 8% rise between Quarter 2 (April-June) and Quarter 3 (July-September), on a seasonally adjusted basis, despite the first monthly fall since April in September according to the Bank of England.
Overall, housing market conditions have been broadly unchanged since the end of 2010. The ratio of house sales to the stock of unsold properties on surveyors' books – as measured by RICS's monthly survey – has shown little change since November 2010 with both the stock of unsold properties and the number of sales largely static over this period.
Commenting, Martin Ellis, housing economist, said: "House prices in the three months to October were 0.3% lower than in the preceding three months.
“There was a 1.2% increase between September and October, according to the more volatile monthly figures, continuing the highly mixed monthly picture.
“Whilst there have been five monthly price rises, four falls and one month of no change, there has been little change in prices during 2011 overall.
"The housing market has proved highly resilient in recent months despite the weak economic recovery and the deterioration in the outlook for both the UK and global economies.
“Despite these developments, house sales and the supply of properties for sale have remained very stable since late 2010. The prospect of exceptionally low official interest rates over the foreseeable future is likely to continue to support the market in the face of a very difficult economic climate.
“Both prices and activity levels are expected to remain close to current levels over the coming few months."
Nicholas Ayre, director of UK buying agent, Home Fusion, commented: "Forget the monthly figure showing a 1.2% rise, which is merely a reflection of the lack of transactions.
"The figure that more accurately reflects the market is the quarterly one, showing a fall of 0.3%.
"The property market, like the economy, is like an engine idling.
"With such uncertainty surrounding the economy and unemployment, not to mention high inflation, it's a surprise the market is proving as resilient as it is.
"More than anything, the market is being propped up by the prospect of low interest rates for at least another year, maybe even two.
"But while prime London property prices are being pushed up by overseas buyers keen to cash in on the cheap pound, in the rest of Britain the picture is one of stagnation - with even modest growth looking like an achievement."
Capital Economics said: “The latest rise in house prices in October adds to the evidence that a lack of properties for sale is supporting prices. However, if the recent signs of a fresh downturn in the labour market are extended, that support is likely to weaken over the next few months.”
