The house price index shows the number of transactions is now just 60% of the long term average - at just 40,600 in January.
Commenting, David Brown, commercial director of LSL Property Services, said: "Concerns over the direction of the economy, and the ongoing difficulties in obtaining mortgage finance continue to take their toll on house prices.
“However, the good news is that downwards pressure eased in January, and we are not seeing anywhere like the price reductions we saw at the height of the last sustained fall in 2009.
“Prices are being cushioned by continued demand from cash-rich buyers, as well as slight reduction in the supply of properties hitting the market.
“We should see a bubble of increased activity at the top end of the market in the next couple of months as buyers look to hurry through purchases of properties worth more than £1 million before the stamp duty hike in April. On top of this, a growing number of rich investors are withdrawing money from destabilising countries, and investing in bricks and mortar in prime locations in London.
“However, transaction levels across the rest of the market are still being suppressed by the lack of high LTV mortgages available for first-time buyers. At a time when wage inflation is being outstripped by inflation, would-be buyer finances are under increasing financial pressure and providing the large deposits required by lenders is unachievable for thousands of potential first-timers."
