Total net property wealth for all private households in the United Kingdom dropped by more than £131bn (3.7 percent), to £3,375bn between 2206/08 and 2008/10 according to a report.
A new chapter from the Wealth in Great Britain report, published on Tuesday by the Office for National Statistics (ONS) also shows that the average net property wealth of households dropped from £204,000 to £195,000.
The largest decline was recorded in households held by "couples with dependent children", with a decrease of 12.4 percent, significantly higher than the 4.6 per cent seen for all property owning households.
The North East, Wales and the North West showed the largest decrease, but 8.8, 8.7 and 8.6 percent respectively.
Scotland and the South West are the only regions that did not see a drop in net property wealth, which remained highest in London, at £287,000 and lowest in the North East, at £132,000.
Although the property itself saw a decline, the total household physical wealth, which includes household contents, vehicles and any collectables, increased over the same period by £51bn to £1,012 billion.
The average wealth for individual households also increased by 4.7 percent, an £1800 increase to £40,900.
This increase in physical wealth was found across the United Kingdom, with the North East the only exception. South East households had the highest physical wealth in both periods, rising to £48,400.
London households fared the worst for physical wealth in both periods, peaking at £35,900.
Adam Challis, head of research at Hamptons estate agents, told the International Business Times UK that the figures reflected the "uncertain" period that the property market is facing during the recession and Eurozone crisis.
"Customer confidence is crucial to everything. Once we make it through this period where there is a real lack of confidence we will see people becoming more active when it comes to trading up and moving property. Once that happens things will get better," he said.
Hamptons' property market forecasts see 2012 representing a "a more conservative re-run of 2011", with the greatest rates of increase forecast in prime London properties.
"There's no escaping it, people are making less money now than they were last year," Mr Challis added.
"We have a lot of talk about recession, which creates negative headlines, which in turn drag down prices. In the near future there will be a point when things re-balance."