Values dropped 1.4 per cent month-on-month in June, taking annual growth to -0.1 per cent – the first negative reading seen since 2012.
The average house price now sits at £216,403 from £218,902 in May, according to Nationwide’s index.
On a seasonally adjusted basis, house prices in June were 3.2 per cent lower than in April.
The slump comes off the back of an unprecedented hit to the economy from lockdown and the coronavirus outbreak, and the almost complete closure of the property market between March and May.
Robert Gardner, Nationwide’s chief economist, said: “With lockdown measures due to be eased in the weeks ahead, housing market activity is likely to edge higher in the near term, albeit remaining below pre-pandemic levels.
“Nevertheless, the medium-term outlook for the housing market remains highly uncertain.
“Much will depend on the performance of the wider economy, which will in turn be determined by how the pandemic and restrictions on activity evolve, including any behavioural shifts.
“The raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy.
“These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.”
The monthly drop in June as measured by Nationwide was not as steep as the 1.7 per cent decline measured in May, providing some optimism in the market.
Chestertons managing director Guy Gittins said: “It is encouraging that the fall in June is less than in May and a sign that the market is recovering.
“Prices were always going to be hardest hit in the first few months of lockdown and we now appear to be in the first phase of recovery and expect prices to begin to level out over the coming months.
“The Nationwide growth figure for London – which shows that average prices are now just three per cent below their all-time highs – is evidence of the capital’s resilience.
“Chestertons has seen a one third increase in the number of sales agreed in June compared to the same month last year.”