UK house prices have fallen significantly in the first 6 months of this year. It is the first major fall in annual house prices since the great crash of 1989 to 2004 (where prices fell 20%)

The driving force behind the falling house prices are the shortage of mortgages available, especially for first time buyers. Even though mortgage interest payments are not particularly unaffordable, many people cannot raise a sufficient deposit or get any kind of mortgage. This is in sharp contrast to the years leading up to 2007, where the mortgage industry was very competitive and banks were keen to bring in new lending criteria making it easier to lend.

The change in nominal house prices since 1994, is still very large. Even a modest fall of 10-20% will leave house prices significantly higher than in 1994.

Look at this historical index of house prices in the UK

Also worth checking out - problems in the UK Housing Market at economics essays