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House prices fell at their fastest rate since February 1995 during May, with average prices down 0.6 per cent, according to research from the Financial Times (FT).

This is the third consecutive monthly fall, and has taken average annual house price growth down to just 2.7 per cent – some 1.2 per cent below the level of 3.9 per cent recorded in April.

According to the organisation's house price index, this is the ninth successive month in which the annual growth rate has fallen, reaching its lowest since June 1996.

Despite the fall the picture is not as gloomy as buyers perceive, according to Dr Peter Williams, chairman of Acadametrics, which carried out the research for the FT. Dr Williams said: "These figures do challenge the perception of a housing market in steep decline as suggested by some other indices."

The FT argues their survey is more accurate representative of the true market, as it covers all transactions in England and Wales – not just those of a specific lender, as with Halifax or Nationwide research.

Furthermore, the FT only considers final transaction prices, as opposed to asking prices, and also reports on specific regions, cities and counties.

Given these nuances in the collection of data, Mr Williams believes the FT offers a more comprehensive understanding of the market - and that falls should not be exaggerated.

"The continued contraction and re-pricing in the mortgage market are adding to the downward pressure on prices and there is little sign yet that liquidity is recovering," said Mr Williams.

"But decline in the mortgage market should not be exaggerated.

"Mortgages continue to be taken out and April saw gross lending of over £25 billion. But with continuing evidence of the slow down gathering momentum there is now in effect a race – will any hoped-for capital market recovery arrive in time to revive the housing market? Currently, the market slowdown is winning."

London prices continue to trend down, but an annual growth rate in the capital of 8.5 per cent (averaged over the past three months) is still some the per cent points higher than the next highest region.

The south-east (5.3 per cent) has recorded the largest annual increase.

Furthermore, seven of the ten regions in England and Wales now have an annual growth rate of less than three per cent. Four regions - the north-west, East Midlands, West Midlands and Wales - have an annual rate below one per cent.

The average house price has fallen by £2,715 from a peak of £231,539 in February to £228,824 in May; back to where we were in August and September 2007.