House prices fell by 0.8% in October but grew by 3.4% year on year, the Land Registry’s House Price Index shows.
The average property value in England and Wales dropped to £165,505.
The region with the highest annual price change is London with an increase of 7.6%.
The East experienced the greatest monthly rise with an increase of 1%.
The region with the greatest annual price fall is the North East with a movement of -0.9%.
Yorkshire and the Humber experienced the most significant monthly price decrease with a movement of -1.8%.
The number of properties sold in England and Wales for over £1m increased by 44% between August 2009 and August 2010, from 506 to 731.
Paul Diggle, property economist at Capital Economics, says: “The second consecutive monthly drop in the Land Registry measure of house prices is further evidence that the devaluation is becoming more embedded.
“The fact that house prices are still overvalued across a range of measures, combined with the poor outlook for the underlying economic drivers of the housing market, means that house prices are likely to fall considerably further next year.”
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, says: “Prices have now fallen for two consecutive months according to this series although it is worth bearing in mind that they are still somewhat higher than where they were a year ago.
“The latest numbers do show significant regional variation and the likelihood is the divergence in pricing between different parts of the country will become more marked over the coming year as public spending cuts begin to bite.”