House prices have dropped by 10.5% over the last year, according to the latest research by Nationwide Building Society.

The price of a typical house has fallen to £164,654, the fastest annual rate in almost 18 years.

Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said: "The price of a typical house fell by 1.9% in August, bringing the annual fall into double digits for the first time since the fourth quarter of 1990. While the pace of monthly falls picked up during the month, the less volatile three month on three month measure, eased very slightly in August to 4.5% from 4.6% in July."

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House builders have also noticed significant reductions in site visits and reservations of new properties compared to this time last year, and they blame a lack of confidence in the market is the biggest reason behind the drop off in demand.

Ms Earley said: "Estate agents' data across all property types is a little more optimistic and suggests that there may be some glimmers of interest returning to the market. Agents report an improvement in new buyer enquiries, perhaps stimulated by the recent falls in prices and the opportunity to negotiate a good deal. However, the reported numbers of sales have not been encouraging. The ratio of sales to stocks has been a good predictor of movement in house prices. Current movements suggest that the increased supply of properties on agents’ books will continue to act as a dampener to house price growth in the short term."

(CD/JM)