The building society’s house price index showed that house prices fell by 0.6% in August, and are 0.4% lower than the same time last year.

The average price of a UK home fell £2,817 from £168,731 to £165,914 over the month.

Robert Gardner, Nationwide’s chief economist, said: “Sluggish demand for homes, combined with only a gradual rise in the supply of available properties, has helped to keep property prices stable since last summer.

“We expect this trend to be maintained over the remainder of 2011.”

“The UK economy grew by just 0.2% in the second quarter of the year – well below its long-term trend rate of around 0.7%,” Gardner said.

He added: “For some time now the residential property market has been moving sideways, as weak demand for homes coexisted with a situation where relatively few homes were coming on to the market.

“A further fall in employment would be likely to upset the relatively delicate demand-supply balance and put downward pressure on prices.”