This follows a 3% drop in prices over the second quarter of this year though London alone has seen consistent price growth in the past four years.
July transactions were also down 5.9% year on year as cheap mortgage deals failed to stimulate demand.
David Brown, commercial director of LSL Property Services, said: “The fact that prices have only fallen by 0.1% means the steep declines seen between April and June have ceased.
“Transactions met their expected seasonal rise of 5% in July. This indicates that the market is not falling off a cliff in the short-term, but that it remains weak in the longer term.
“The number of properties sold in Q2 2011 was 5.9% down on the same period of 2010. This is primarily a result of the continuing restriction on demand from tight mortgage lending criteria.
“Lenders worried about the economic picture in the UK and beyond are reluctant to return to high-volume lending at high LTVs.
“But this hasn’t stopped lenders taking advantage of low interest rates to compete for market share of borrowers who are considered a safe bet.
“Below 70% LTV, there are now five year fixed rate deals below 3.4% and for many buyers stagnant prices and increasingly affordable mortgages make for great opportunities to lock into deals at an unprecedentedly low cost.
“Those able to convince lenders they are a low-risk borrower are taking their chance to get onto the market at a favourable time and this has driven transactions for larger properties.
“The 22% growth in mortgage lending for house purchase announced this week by the Council of Mortgage Lenders is testament to this.”
The research revealed that of all types of property, flats have shown the weakest growth in transactions.
“This indicates that the first-time buyers who would normally be driving the market for smaller properties remain excluded from the market,” said Brown.
“Since 2007, only Greater London has seen a rise in property prices, but even this 5.6% rise over the last four years means prices in the capital have fallen 7.5% in real terms.
“Nationally, prices have fallen in real terms by just over 17%. This has significantly reduced homeowners’ ability to fund additional spending through equity release, but means cash buyers and low LTV borrowers will find property great value.”
