UK house prices dropped by 1.7% in September leaving the average property costing £161,797 according to figures by the Nationwide Building Society.

Overall house prices have fallen 12.4% in a year, however Nationwide said prices will continue to drop in short term but longer prospects are more sound.

Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said: "House prices now are over 60% higher in real terms than they were at the start of the decade, even taking into account the falls since last October.

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"Even if prices fall over the next couple of years, at the trough that would still leave prices more than a fifth higher in real terms than at the start of the decade. Although price falls are not painless, they do contribute to restoring housing affordability to more sustainable levels, which is positive for the market over the long term."

Ms Earley concluded: "Although the next year or two will be difficult, over time the global economy will recover from current difficulties, helping to end the cyclical downturn in property markets."

(CD/JM)