Average UK property lost 0.3% of its value during the year to the end of July, the first time it has recorded negative annual growth since the index began in 2003.
The North continues to see the biggest price falls, with homes losing 10.3% of their value in the year to the end of July.
It was the ninth month in a row that UK house price growth fell, British government figures showed today.
But despite the fall on an annual measure, the index also recorded a 1% jump in house prices during the month itself.
The increase in property prices during July is out of step with data reported by other house price indexes, with these showing steep falls during the month.
Both Halifax and Nationwide said homes lost 1.7% of their value in July, pushing annual losses up to 8.8% according to the Halifax measure.
The Department of Communities and Local Government (CLG) said the difference between the indexes was likely to be caused by the different methodologies they used, with Halifax and Nationwide both calculating prices according to mortgage approvals, whereas it bases them on completions.
As a result, its data tends to lag behind the other two by up to three months, suggesting the more severe price falls recently recorded by Nationwide and Halifax could show up in the CGL index in the coming months.
The CGL data is also not seasonally adjusted, so July's price rise could reflect the traditional summer increase in activity, despite the more subdued market conditions.
However, despite these factors, Howard Archer, chief UK and European economist at Global Insight, said the month-on-month increase was still a surprise and "at odds with other surveys".
He said: "It seems odds-on that house prices will head downwards for some considerable time to come, particularly as lending conditions could well tighten further in the near term at least amid the current turmoil caused by the collapse of Lehman Brothers."