The fall in consumer confidence was echoed by a monthly survey from GfK NOP, the polling company, on Thursday. The report said confidence in March stagnated, holding just above a two-year low, as households waited to see if they would benefit from tax measures in Britain's annual budget.
"Consumer confidence has stagnated at depths seldom seen outside of actual recession. The last time it was this consistently low was two years ago, and before then in autumn 1990," said Nick Moon, managing director of GfK NOP Social Research.
Official data released on Tuesday showed that last year British households suffered their first annual real-terms fall in disposable income since 1981.
Nationwide expects demand for houses to remain fairly soft and a rapid increase in the supply of properties also appears unlikely.
Mr Gardner said: "With the economic recovery expected to remain sluggish, the most likely outcome is that the property market will follow suit, with low transaction levels and prices moving sideways or modestly lower through 2011."
Nicholas Ayre, a director of UK buying agents Home Fusion, said of the Nationwide house price figures: "Never has a monthly price rise been less representative of the state of the property market.
"Given the state of demand, the recent trend of price rises the Nationwide has observed is likely to be short-lived ... the only thing that seems to be falling, and sharply, is consumer confidence."
A separate survey by Hometrack, the property research company, added to the gloom.
It said house prices in England and Wales fell at their fastest annual rate in 17 months in March and only strong demand in London prevented an even bigger decline.
Prices fell by 3.2pc in March compared to a year ago, according to Hometrack - the biggest fall since October 2009, when Britain was emerging from an 18-month recession.
On the month, prices fell by 0.1pc, the smallest drop since July, after a 0.2 percent dip in February.
However, Hometrack said London's relatively strong performance flattered the monthly figure, masking bigger falls in every region except southwest England where prices were unchanged.
Prices in Greater London rose by 0.2pc and climbed by 1pc in the centre of the capital, buoyed by strong demand and weak supply.
House prices are expected to continue to fall during 2011, dragged down by tight lending, government spending cuts and tax rises, high unemployment and low wage growth, Hometrack said.
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