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Figures from Nationwide show that the average cost of a house suffered the biggest drop since comparable data was first collected in 1991, reports the Times newspaper.
According to Fionnuala Earlyer, chief economist at Nationwide, 2008 was "a year of turmoil" for the housing market in the UK.
She commented: "This time last year we expected the housing market to cool quickly as affordability was poor and economic conditions looked set to weaken, but we did not anticipate the speed of house price falls or the extent of the global and domestic economic slowdown."
Last month, house prices slipped by 2.5 per cent on November's figures after the Bank of England cut the basic rate of interest to the equal lowest level in history.
