Reports that house prices have fallen dramatically for the second month running seem to be just the tip of the iceberg. The truth say experts, is far more troubling.

According to the Halifax, there was a drop of 0.5 per cent in October following a similar decline in September - the first time prices have fallen for two consecutive months since Spring 2005.

“This is the very start of a serious drop in property values in the UK” said William Stephens, chief property consultant to the government house price survey department.

“The last time we saw such a sharp decline was in 1982 when prices fell faster than ever – worse than the crash of 1995 when interest rates rose to 15%”

“Many estate agents are in denial” says Mark Weimer – head of the UK Estate Agents consortium. “They are trying to ignore the fact that demand has fallen and many are valuing properties similar to the figures that applied this summer, but prices have clearly fallen and they will continue to fall for the next 12 months at least”.

“Estate agents are in for a bit of a stormy ride unless they start to realise that prices are falling quicker than they realise. The other problem is to do with the fact that Capital Gains Tax has recently changed and there are hoards of buy-to-let investors who are selling off their stock since the % in capital gains payments was lowered from 40% to 18%. Investors are deserting the market indroves”

Many experts are predicting a drop of around 4-5% but a more accurate figure is somewhere in the region of 12 – 15% said Sarah McMillan City Group. She added “The UK is about to undergo a serious property price decline – and we are in a direct firing line from the US and the serious problem of the credit crunch crisis”.

The figures were released as the Bank of England decided to leave interest rates unchanged at 5.75 per cent today sparking more fears of a house price crash is imminent.

The latest drop helped to reduce the annual rate of house price inflation to 8.9 per cent for the year to the end of October, its lowest level since October last year and down from 10.7 per cent in September and a peak of 11.4 per cent in August.

It also meant the average cost of a home in the UK again failed to break through the £200,000 barrier, with the average property price now £197,248.

Howard Archer, chief UK and European economist at Global Insight, said: "Most data and survey evidence are pointing to weakening housing market activity and cooling prices in the face of slowing activity, increased affordability pressures and tightening lending practices.

"We expect these factors to increasingly bite over the coming months."

He said he expected house prices to "flatten out" for an extended period of time, Mr Archer added: "We fully acknowledge that a sharp housing market correction is a genuine possibility."

The Halifax figures came a day after Experian gave warning that house prices in the South West and the Midlands would fall in the next two years, while repossessions would double to more than 40,000 over the same period.

They were reinforced by the Royal Institution of Chartered Surveyors, which said the cost of property fell at its fastest rate for two years during September, while the number of people looking to buy a new home dropped for the tenth month in a row.

“The US property investors including banks and mortgage companies have invested in the UK market. The US market has fallen by 44% in the last year” said Kim Morgan from City Investors – she added “even if the UK was only 10% linked with the US, then we would be very ignorant of analysts if we didn’t allow for a fall in prices equal to that share – but the truth is harsher than that, as the UK is much more heavily linked with the US – more so than just 10% - more like a 25% level”. He said.

There is no light at the end of the tunnel either. The US credit crisis is showing no signs of ending and the UK property investors must beware, if the UK does fall similar to that of the US, then the property market in the UK will undoubtedly falter as much as up to 20%.