SCOTLAND'S two biggest cities have suffered the largest drops in house prices in the past year.

Prices in Glasgow fell 9.6% between January 2011 and this year, with an average house now at £155,435, according to a new report by Lloyds TSB Scotland.

Edinburgh suffered a bigger fall of 10.8% over the year, although average house prices in the capital remained the highest in the country at £188,892.

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However, Dundee bucked the trend with a 7.8% rise in the average price of a property. Prices there remained among the cheapest in Scotland, at £129,445 on average, Lloyds TSB's Scottish House Price Monitor said.

The report showed the housing market has "plateaued" and shows no sign of "vigorous recovery". The quarterly price index for properties rose by 1.4% between November and January but over the year property values still fell 4.2%, making the average price of a home £155,528.

The number of houses changing hands was 3.3% higher in December 2011 than in the same month in 2010 and experts said they expected the number of transactions to remain at around the same level this spring as last spring.

Donald MacRae, chief economist at the bank, said the housing market "remains down but not out".

He said: "The Scottish housing market has adjusted to the recession with a halving of sales and a period of volatile price movement.

"Average house prices are now 91% of their peak of three-and-a-half years ago. Consumer confidence fell further during the last quarter of last year due to a high level of retail price inflation in excess of increases in earnings, squeezing disposable income.

"The Scottish housing market appears to have plateaued in both sales numbers and price movements. There is no sign of a vigorous recovery in the Scottish housing market but equally no sign of a further precipitous fall in either house sales or house prices."