New Government figures show house price inflation has eased back to its lowest level for 16 months as the property market continues to face challenges.

The Department for Communities and Local Government said growth dropped to 8% during the year to the end of January, compared with 8.4% seen in the year to December.

But there was some good news for householders as the average cost of a home increased by 1.7% in the first month of 2008 to stand at £221,758.

Broken down, the data shows detached house values jumped by 4.3%, while the cost of flats and bungalows rose by 1.3% and 1.1% respectively.

The figures come as two separate studies also indicate the housing market is cooling down.

The Royal Institution of Chartered Surveyors said the number of surveyors reporting house price falls in February rose to its highest level since the 1990s house price crash.

And the Council of Mortgage Lenders said just 50,300 home loans were taken out by people moving in January, the lowest level since it started to collect data in this format back in 2002.

Overall, the DCLG stats show a mixed picture of house price growth across the UK.

Four regions saw an increase in house price inflation, while eight regions experienced a decrease.

Unsurprisingly, London remains the only area where annual growth remains in double digits at 13.8%, while the average cost of a home in the capital also broke through the £350,000 barrier for the first time to stand at £351,096.

House price inflation remains slowest in the West Midlands, with property prices rising by just 3.2% in the past year, while they have edged ahead by just 4.8% in the North West.

Howard Archer, chief UK and European economist at Global Insight, said: "Taking an overall view of the housing market, including the latest surveys by the Nationwide and the Halifax, it appears that house prices are cooling markedly but not collapsing at this stage.

"Meanwhile, the Rics survey reinforces the view that house prices will continue to soften over the coming months in the face of stretched affordability and tighter lending practices.

"Consequently, we continue to believe that house prices are likely to fall by 5% in both 2008 and 2009."

Copyright © PA Business 2008