The avalanche of evidence that the housing market's downturn is continuing apace has been bolstered by the first fall in prices recorded by the Land Registry since it began keeping data seven years ago.

According to the agency's monthly figures, average house prices in England and Wales fell 2% to £178,364 during the 12 months to July. It is the first time the agency has recorded an annual drop since it began collecting figures in April 2000.

The agency's data is based on all housing transactions in England and Wales and therefore lags slightly

June's data which initially showed a 0.1% average rise during the past year has also been revised down to a drop of 0.6%, the Land Registry said.

Last month's fall is well down on the double-digit declines recorded by the likes of Nationwide Building Society, which yesterday said house prices were 10.5% lower this month than a year ago based on mortgage information from its customers.

But the Land Registry believes its survey is more authoritative. Prior to 2000, the agency recorded property prices on a quarterly basis going back to 1995.

Its latest data showed average prices fell 0.6% between June and July, the sixth consecutive monthly decrease.

All regions bar London saw prices fall in July on an annual basis. London prices rose 1.7% thanks to bigger hikes in more affluent boroughs like Westminster and Kensington and Chelsea.

The East Midlands saw the biggest yearly drop, down 5.1%, followed by Wales where prices were 4.4% lower.

Detached houses appeared to be faring worst, with prices dropping 2.3% on average. Semis, terraced houses and flats were all 2% lower.

The figures also showed that the number of homes changing hands had fallen sharply during the past year, with transaction volumes for May - the most up-to-date figure available - 43% lower than 12 months earlier at 61,038. London saw a slightly bigger drop of 46% to 7,240 in May.

The rate of decline in housing transactions was more severe than during April, when 39% fewer properties changed hands than during the same month of 2007.

Seema Shah, property economist at Capital Economics, warned of more gloomy data to come.

She said: "Buyer confidence, already reeling from the fall-out of the mortgage credit squeeze, is likely to be further depressed as the economy heads for recession. This will represent another huge blow to the housing market."

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