Britain's property market was dealt a double blow yesterday as the prices of shops, offices and warehouses suffered their fastest monthly fall for 21 years and Taylor Wimpey, the country's largest housebuilder, said that the spring housing market would be late and subdued.

Commercial property prices slumped 4.2 per cent in December, bringing the total decline in only three months to 9.7 per cent - a sharper decline than that suffered in the last recession of the early 1990s.

The figures from Investment Property Databank (IPD), which monitors £400billion of privately owned assets, prompted the property derivatives market to price in a full-blown recession for the next two years. Returns, which include rental income, are forecast to be minus 12 per cent this year, followed by minus 5 per cent in 2009. The declines assume sharper falls in capital values offset by rental growth.

Prices of commercial property have fallen by an average of 11.7 per cent since a peak hit in June, according to IPD. Prices of commercial property in the two previous recessions, starting in 1974 and 1990, endured three-year declines.

Meanwhile, Taylor Wimpey said that it had sold 20,645 homes last year, an annual fall of 5.8 per cent, while its forward order book for the year ahead is down 19 per cent at £1.064 billion.

Peter Redfern, chief executive of Taylor Wimpey, said: “Spring will come, but it will be later and slower than in previous years. It will be more subdued and activity depends on the more general factors of interest rates and the approach of mortgage banks to lending. In terms of overall confidence we have yet to see an improvement.” The company's shares fell to a record low, down 13.3p to 159.2p.

Ruling out any price war between housebuilders looking to shift stock, Mr Redfern said: “There will be pressure on prices, but that may only see targeted incentives to help individual customers deal with upfront costs.”

Taylor Wimpey is considering incentives such as contributions to cover buyers' first two years of mortgage costs, but Mr Redfern insisted that margins would be maintained partly by pressure being brought to bear on suppliers' costs.

Mr Redfern said it was possible that a £750million share buyback programme that was started in August and was due to complete this year would be put on hold. The company has already spent £250 million buying back 8.3 per cent of its share capital at an average price of 264p.

Surplus cash may be used to help to cover the cost of the extra incentives to buyers and to purchase bare land if prices fall this year.

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