Has the housing market finally bottomed-out?

The latest fall pushed property values back down to a level last seen in September 2004, at an average of £153,862, according to the Land Registry.

But experts claimed there were signs that the housing market was finally starting to bottom out - with an increasing number of mortgages approved and more buyers registering with estate agents.

February was the 18th month in a row in which the annual rate of growth fell, contrasting with the 21 months of uninterrupted gains in annual house price inflation between December 2005 and August 2007.

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House prices fell in all areas of England and Wales on both a monthly and an annual basis during February.

The North West saw the steepest drops, with property there losing 4.1 per cent of its value during February alone, while Wales, the West Midlands and the East Midlands all also saw falls of more than 3 per cent.

The annual rate of house price falls has been steepest in the West Midlands at 17.7 per cent, closely followed by Wales at 17.6 per cent and the North West and South West, where properties have lost 17 per cent of their value during the year to the end of February.

Price falls have been slowest in the North East, with the annual rate of decline running at 14.2 per cent in February.

The number of homes changing hands continued to be less than half of the levels seen a year ago.

An average of just 38,830 homes were sold during the three months to the end of December, the latest period for which figures are available, down from an average of 95,679 during the corresponding period of 2007 - a 59 per cent drop.

But although the number of properties sold was lower during December itself at 36,341, there was a slight moderation in the rate of decline, with sales during the month 55 per cent lower year-on-year.

Only 188 properties changed hands for more than £1 million during December, down from 421 just 12 months earlier.

Recent figures from the British Bankers’ Association have shown that the number of mortgages approved for house purchase has risen for three months running, while anecdotal evidence from estate agents also suggests that buyers are beginning to return to the market.

But there is not expected to be any recovery in house prices while the mortgage drought continues and the recession causes people to feel insecure about their jobs.

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Howard Archer, chief UK and European economist at IHS Global Insight, said: “While latest mortgage approvals data suggest that housing market activity may have bottomed out and survey evidence indicates that buyer inquiries have picked up significantly recently as people are attracted by lower house prices and the Bank of England slashing interest rates, we remain sceptical that sales will pick up substantially any time soon and put a floor under prices.”

But Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: “Lower prices and the cheap cost of money has begun to fuel an increase in buyer interest as reflected in the RICS ’new buyer inquiries’ series which has risen for four consecutive months.

“This turnaround in the appetite of potential house purchasers is now becoming more visible in actual transaction data and confirms that the increased number of people registering with estate agents are doing more than just window-shopping.

“Land Registry numbers show sales edged up in December from the November low and the more timely mortgage approvals figures indicate this more positive trend has further to run over the coming months although activity will still remain at relatively depressed levels.”