House prices across the UK will fall by up to 10 per cent this year, before beginning to recover in 2010, a report to be published later this month by the Centre for Economics and Business Research will show.
The think-tank believes this weekend is likely to mark the beginning of the end of the housing market's collapse, with clear green shoots in the sector likely to emerge in the months ahead. It said that the market recovery could even begin this autumn.
The Easter weekend traditionally marks the busiest time of year for estate agents, with housing transactions almost always peaking three to four months later.
While many property professionals remain extremely nervous about the parlous state of the sector, the CEBR predicted that while house prices would continue to fall over the next few months, the rate of decline would slow markedly, with transactions and mortgage approvals rising slowly.
The CEBR report will encourage the housing market, which is already hoping that the first tentative signs of optimism seen in recent weeks are sustained. Nationwide and Halifax, the country's two largest mortgage lenders, both reported a small average increase in house prices last month – the first such rises since the end of 2007 – while mortgage approvals in February were up 20 per cent on the previous month.
"With base rates at an all-time low, even a relatively modest rise in mortgage approvals to, say, 60,000 to 70,000 per month may be enough to offset the impact of the meagre wage settlements and rapidly rising unemployment that will continue to unfold over the course of the year, and could lead to house prices bottoming out by the third quarter of this year," said the CEBR.
It believes mortgage approvals will recover more slowly, with prices still sliding this year as more jobs are lost.
"Under these circumstances, our models suggest that prices only have a further 8 to 10 per cent to fall and are likely to bottom out by the start of 2010."
One additional factor in favour of an early housing market recovery is evidence that mortgage lenders are beginning to relax their home-loan criteria. HSBC said this week it was releasing £1bn of funding for loans to value of up to 90 per cent, the sort of deals for which first-time buyers most commonly look.
However, while property professionals will welcome the CEBR's predictions, other experts are much less sanguine. Fionnuala Earley, Nationwide's chief economist, said: "While the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached."Reuse content