Vince Cable, business secretary, has acknowledged the threat of a double-dip recession.
“The government’s own forecasting risk puts it at something like one in four, one in five,” Mr Cable said, before putting his own estimate at “certainly well below 50-50”.
The Midlands, Wales and the north of England saw the biggest falls, the Royal Institution of Chartered Surveyors reports on Tuesday. These areas are more dependent on public spending and likely to suffer disproportionately from budget cuts.
Ian Perry, of Rics, said: “The forward-looking price expectations numbers suggest this softer trend will continue through the second half.”
In July, 25 percent of surveyors reported falling house prices over the previous three months, compared with 11 percent saying prices rose.
On a seasonally adjusted basis, the negative balance of -8 was the first time the Rics headline measure had indicated falling prices for a year.
The survey, which has a good record in leading the market, indicated that a glut of sellers alongside buyer reticence caused the dip in prices.
Apart from a spike just before the introduction of Home Information Packs, new instructions to sell properties reached their highest level for over a decade while estate agents reported declines in new buyer inquiries.
Many estate agents reported buyers were struggling to raise mortgage finance, a predicament that would worsen if house prices continued to fall.
The high profits for banks in the first half were helped by lower impairment of existing mortgages and expectations house prices would be stable.
Lloyds Banking Group said last week it expected “static” house prices in 2010 and a 3 percent rise in 2011.
In London, estate agents report a buoyant market, with prices in some areas exceeding the peaks of 2007, but even here they are cautious.
More expect prices to drop in the remainder of the year. John King, of Quinton Scott in Wimbledon, said: “The number of viewings to offers has declined and the pick-up we saw earlier in the year has run out of steam.”
A slowing housing market will add to the uncertainty facing the Bank of England as it tries to gauge the prospects for the recovery.