House prices in London fell by 13.3% last year, compared with a UK average fall of 12.8%, according to the Centre for Economics and Business Research (CEBR) house price poll-of-polls, commissioned by Chesterton, the estate agent.

The research found the average property in England and Wales is now worth £171,348 at the same level last seen in February 2006 and alsodown 1.6% from November 2008.

However, it wasn’t all bad news. Scotland was the only area that escaped the falls in prices with marginal growth during December.

Looking at the different types of housing, the worst hit were terraced housing which has seen a fall of 13.2% over the year. Detached houses proved to be the most resilient, with a year-on-year drop of 10.8%.

Douglas McWilliams, Chief Executive of cebr commented: “The Chesterton Poll of Polls shows that house prices now have flattened. The economic news confirms that the UK economy will, at best, slowdown in 2008 even if it avoids a recession. Most economic commentators (including me) think that house prices will fall in 2008. Evidence suggests 2008 will be the worst year for house prices since 1995 when house prices fell by 1.7%.

“What might make matters worse are the Home Information Packs which the government introduced for all houses and flats on 14 December. Before then there had been a surge of properties put on the market but since then the number has dried up. Home Information Packs are at best an unnecessary tax on home sellers but their badly timed introduction could cause an additional weakening of confidence”

Robert Bartlett, Chesterton CEO, comments: “The general discord in the UK economy has seen the housing market soften in last few months of 2007, although key London property continues to witness strong demand with substantial prices still being realised. The ¼ point reduction in interest rates by the Bank of England in December has had little effect on consumer confidence and that, coupled with the HIPS debacle, has lead to a dramatic reduction in good quality stock being available.

“For 2008 we believe that property prices will remain flat to negative 2% through to Spring, but with a reduced number of transactions as a result of a deepening divide between buyer /vendor expectation. However, further reductions in interest rates should help to shore up confidence as the year progresses. Should base rates reduce to 5% by the early summer, then we would expect some modest growth to reenter the market. London prices would likely show growth of up to 2-3% for the year, with higher growth rates likely in Central London and other core London areas where strong demand and low stock availability persists. The early part of 2008 could be a great opportunity for those looking for bargains.”