House prices across the country will edge down 1pc during 2013 as the London market shows signs of cooling, according to property analysts.
Prices fell 0.1pc month-on-month in December, marking the sixth month in a row that this has happened, and average prices ended the year 0.3pc lower than a year ago, Hometrack said.
It predicts that a reluctance by struggling families to take on more debt will continue to act as a drag on the housing market next year and prices will be more volatile with continued low sales.
Hometrack's monthly figures for December show prices were flat in London and East Anglia, fell 0.1pc in the Midlands, the South and Yorkshire and Humberside, dropped 0.2pc in the North West and Wales and by 0.3pc in the North East.
One in five postcodes in England and Wales recorded price increases over the past year but prices have fallen across two-thirds of the country.
London has had strong demand from wealthy overseas buyers and consistently outperforms other regions, seeing prices rise in seven out of 10 postcodes this year. Property prices are now 10pc higher than at the peak of the market in 2007.
But price growth in London, vital to keeping average prices up in the rest of the country, is predicted to slow over next year, with a 2pc annual increase pencilled in.
Richard Donnell, director of research at Hometrack, said: "Affordability constraints and a general unwillingness by households to take on debt will continue to act as a drag on the housing market in 2013, at least until such time as the economic outlook sees a clear improvement.
"Hometrack forecasts that average prices will remain under slow downward pressure, falling by 1pc in the 12 months to December 2013 against a backdrop of continued low turnover and greater price volatility."
Around 912,000 sales should take place next year, well below the Council of Mortgage Lenders forecast that transactions will pick up to around 950,000, Hometrack said.
Mr Donnell said central London price growth looks set to slow, following the introduction of a 7% stamp duty rate placed on homes worth over £2m in March.
"As has been the case over the last three years, the prospects for the London market will have an important bearing on overall house price growth in 2013," he said.
"London continued to provide important support to headline trends in 2012. The question is whether this is a trend that can be maintained.
"We expect price growth in London to moderate over 2013, growing by 2pc. The impetus for growth in central London looks set to slow in the near term as concerns over tax changes impact the upper end of the market."
The Office for National Statistics recently indicated that house price increases in London could be slowing. The rate of year-on-year price growth in the city dropped from 5.2pc in September to 3.4pc by October.
Mr Donnell said that "despite the hype", the success of the Olympics failed to spill over into the east London housing market, with price growth remaining low.
The study regularly asks estate agents across England and Wales about achievable selling prices.
Hometrack's predictions jar with some other recent surveys, including one from Rightmove (LSE: RMV.L - news) which said increased competition among mortgage lenders and a continued shortage of homes to choose from will help to push asking prices up by 2pc across England and Wales next year.
The Council of Mortgage Lenders has said it expects the housing market to "feel more stable and positive" next year, with much of the boost coming from a multibillion-pound Government scheme which has already helped to increase mortgage availability.
But the council has also said demand for mortgages could be held back by the weakness of the economy and much will hinge on the continued resilience of UK employment.
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