House prices fell by no less than 3.6 per cent in September, according to the Halifax survey out this morning.

Lloyds Banking Group, which as you know owns the Halifax these days, immediately jumped to the defence. Martin Ellis, its housing economist said: “Looking at quarterly figures – a better measure of the underlying trend, house prices in the third quarter of 2010 were 0.9% lower than in the second quarter of 2010. This rate of decline is significantly slower than the quarterly changes of between -5% and -6% that were seen in the second half of 2008. It is therefore far too early to conclude that September’s monthly 3.6% fall is the beginning of a sustained period of declining house prices.”

He went on to say; “The underlying pace of house price growth has turned moderately negative in recent months.”

But however you dress it up, the fact remains that the fall was dramatic.

Hometrack had prices down 0.4 per cent in September, the biggest fall in its index since March last year. By contrast, the Nationwide reported a 0.1 per cent rise; but then again, it had prices falling in the two previous months by 0.5 per cent and then by 0.8 per cent.

There is something quite freakish about the Halifax figures, and it is too soon to be concluding that the market is in freefall.

Nevertheless, the fall was consistent with the rise in the number of new instructions and the fall in enquiries picked up by RICS in recent months.

And while property bulls insist house prices can only go up, with VAT set to rise; wage increases lagging below inflation; the uncertainly related to public sector job cuts; and the need for us all to save more to bridge the pension deficit; it is hard to see how the bulls can be right.

When Isaac Newton sat under that tree, and the apple fell on him, there was a danger the bump would destroy his wits. Instead, he thought of the theory of gravity. It seems that news of his discovery has not yet filtered through to property economists. Either that, or 50 years of a property bubble has destroyed their wits.

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