Last updated 05:46, Friday, 19 September 2008

The average price of a home sold at auction has dived by more than 23 per cent during the past year.

Under the hammer: A packed auction room in Carlisle earlier in the summer. A survey shows the fall in house prices at auction is nearly double the annual property price drops being reported

About 3,993 houses went under the hammer between June and August, selling for an average of £130,400 each – 23.4 per cent less than the £170,300 homes sold for at auctions during the same period of last year, according to the Liberal Democrats.

The fall is nearly double the annual property price drops being reported by house price indexes.

Halifax said homes in the UK had lost an average of 12.7 per cent of their value in the year to the end of August, while Nationwide Building Society put the figure at 10.5 per cent.

Liberal Democrat Treasury spokesman Lord Oakeshott said: “These dramatic figures show just how fast house prices are falling at the sharp end. The published house price indices are well behind the curve.

“Property professionals are now pricing in a fall of 31 per cent in the Halifax house price index from its peak this January to the bottom in 2011, followed by a very slow recovery.”

But Martin Ellis, Halifax chief economist, said: “I would expect house prices at auctions to fall more quickly because you have proportionately more distressed sales, such as repossessed properties.”

He said the fact that people or lenders selling a property at auction wanted a quick sale was likely to depress prices.

Lord Oakeshott also criticised the Government’s recent announcement that it was suspending stamp duty on properties worth up to £175,000 for a year as being like “standing in front of a runaway train”.

He said: “It is pointless at best, and could be downright dangerous if it ends up sucking vulnerable first-time buyers into negative equity.

“The Government must do far more to empower housing associations and councils to buy unsold homes and land, which would save our building industry from collapse.”