Government figures show annual fall of just 0.3%, against recent lender reports of 10% decline

A small recovery in house prices during July has slowed decline in the housing market, according to government figures released today.

The price of the average UK home rose by around 1% to £217,171 in July, up from £215,029 in June, announced the Department for Communities and Local Government (DCLG).

This helped to slowed the quarterly rate of UK house price falls, with a drop of just 0.5% in the three months to the end of July following a 1.3% fall in the previous quarter.

House prices in the UK were on average just 0.3% lower in July than in the same month a year ago, according to the DCLG. By comparison, mortgage lenders have recently reported annual house price falls of over 10%.

Homes for first-time buyers fell by 1.6% in the year to July, DCLG figures show.

Howard Archer, chief UK economist at Global Insight, told the Guardian that the outlook remained dismal. “It seems odds-on that house prices will head downwards for some considerable time to come,” he said, “particularly as lending conditions could well tighten further in the near term, at least amid the current turmoil caused by the collapse of Lehman Brothers.”

Archer told the Guardian that he expected house prices to fall 15% in 2008 followed by a further 12% decline in 2009.