December was another bleak month for the housing market.

According to Halifax, UK house prices fell 2.2% in December – putting the annual drop in the housing market at 16.2%.

The average price of a house has dropped by £37,178 over the course of 2008 – the average house price is now £159,896, a level last experienced in August 2004.

Halifax predicted that house prices will continue to fall for some time.

Martin Ellis, Chief Economist for Halifax, said: “Continuing pressures on incomes and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are expected to exert further downward pressure on the market over the coming months.”

There is some good news however as the fourth quarter displays a national decline of 5.2% – similar to the decreases recorded in the previous two quarters, indicating that the rate of decline may be stabilising.

Furthermore, it means houses are now more affordable – the house price to earnings ratio is at its lowest level since April 2003.

Data from the Bank of England and RICS revealed that estate agents reported the first increase in newly agreed sales for 18 months in November and the first rise in new buyer enquiries since October 2006.