Growth in UK property prices increased at a slower pace of 4.9% in June, down from 5% a month earlier, according to the latest Office for National Statistics (ONS) figures.
The data shows that despite the annual dip in home prices, the average price a home in the UK rose by 0.8%, or around £2,000, between May and June, with wide variation in price movements across the country.
The fastest growing part of the country for home values was the east of England, with growth of 7.2% in the year to June, followed by the east Midlands at 7.1%.
The slowest price increases were recorded in London and the north east.
In fact, the average price of a home in the capital fell £3,000 to £482,000.
The ONS analysis of the housing market, which is based on actual transactions compiled by the Land Registry and reveals movements at a local level, reveals that the biggest change was in Orkney where the average price is 28% higher year-on-year at £148,000.
At the other end of the spectrum, the City of London has seen the weakest house price growth over the last year, with prices falling by 20% to £724,000.
Jonathan Hopper, managing director of Garrington Property Finders, commented: “After the previous month’s data showed a decline in London’s house prices, it’s concerning but not surprising to see a further - and more pronounced - fall in the capital’s prices in June.
“For years, London’s property market seemed to know no bounds, but for two consecutive months the capital has seen a deceleration in prices, forcing sellers to adjust their pricing in keeping with a new reality.
“There is a degree of inevitability about prices cooling, as house price inflation in the capital raced ahead of wage inflation for several years, but ultimately this situation was always going to be unsustainable.
“Across the country as a whole, house prices remained largely flat, although a few regions outside of London also experienced a slowdown in property price growth.
“Although the ongoing lack of supply has continued to prop up prices, in practice there are many buyers closely watching these movements in the market and managing to secure weighty discounts.
“Sellers who are conscious of this and are both pragmatic and flexible in their approach to pricing are most likely to guarantee a sale in today's market.”