CEBR predicts 28% fall in house prices before bottoming out

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by Kay Murchie

According to the Centre for Economics and Business Research (CEBR), house prices have about a further 8% to fall before bottoming out.

The thinktank is predicting that prices will reach their trough in early 2010 and will see modest increases next year but real price growth won‘t start again until 2013.

Prices have fallen by around 20% since their peak in summer 2007, taking the total fall in house prices to 28%.

According to the organisation, the average house price will be £144,000 by Christmas 2009, rising to around £170,000 by the end of 2013.

The forecast comes amid hopes of a recovery in the housing market after mortgage approvals have increased and credit conditions have improved.

Last week, the Nationwide announced a fall of 0.4% in house prices for April but reported that the decline is slowing. Furthermore, the Bank of England revealed that the growth in mortgage lending was likely to continue.

However, according to Benjamin Williamson, one of the CEBR report’s authors, suggesting that the market has bottomed out is “slightly premature”.

Meanwhile, Ben Read, managing economist at the CEBR, said: “House prices were likely to remain in the doldrums for some time as what is likely to be a slow recovery in the real economy translates into weak wage growth and stubbornly high unemployment - factors that will put a fairly heavy lid on house price inflation.”