A shortage of buyers sent house prices falling in July, the first month since February that they dropped, figures showed yesterday.

The average price of a UK property dropped 0.5 per cent to £169,347 between June and July, according to Nationwide Building Society.

It said the fall came as the numbers of househunters dwindled amid uncertainty over jobs and the wider economy as the Government ramped up its austerity drive.

But property experts in the South West said the gloomy figures might not reflect the Westcountry's market.

Richard Copus, Devon branch spokesman for the National Association of Estate Agents, said: "I urge people to take these figures with a pinch of salt. Figures on the ground show house prices are stable, if anything increasing slightly rather than decreasing.

"The market and buyers may be sensitive, but everything is stable and in Devon we are not anticipating any significant increase or decrease in prices within the next six months."

Truro-based estate agents Lillicrap Chilcott said that the Cornish market did not support Nationwide's figures, after their company sold at least one house every working day of the last three months. – a total of 83 new sales agreed at an average selling price of almost £550,000.

Andrew Chilcott said: "The market is strong. There are lots of buyers and lots of people out viewing but it is a different market to a number of years ago and one that requires a different approach. We forecast it is a market that will continue in this transitional stage while the macro-economic conditions remain or until a significant number of new houses are built in Cornwall."

It added that prices were 6.6 per cent higher on an annual basis in July – lower than the 8.7 per cent in June and that, despite record low interest rates and a stamp duty holiday for most first-time buyers, the number of properties changing hands across the UK is running at half the levels seen prior to the financial crisis.

Martin Gahbauer, Nationwide's chief economist, said: "A combination of restrictive credit conditions and uncertainty about the future economic outlook continues to limit the pool of buyers to those with relatively large financial resources.

"Many potential buyers still lack the confidence to purchase their first home or trade up when faced with uncertainty over future income and employment prospects."

He said it would take several months to establish if the market is on a downward trend, or if prices are merely flattening out.