Page last updated at 09:38 GMT, Monday, 10 August 2009 10:38 UK

Economists predict home price dip

For sale sign
The UK housing market has shown signs of life recently

House prices will fall by a further 3% this year before recovering slightly in 2010, a group of economists has said.

The Centre for Economics and Business Research has forecast that after more falls in value this year, UK average prices would go up by 2% in 2010.

The consultancy is the latest group to indicate its predictions for the housing market.

It is more gloomy for homeowners than others, who have suggested prices might end 2009 higher than they started it.

Further gains

The CEBR said the value of the average UK home would continue to rise in the following two years, increasing by 3.6% in 2011.

Our view is that the extent of house price falls already seen means further significant falls are unlikely
Benjamin Williamson, CEBR

The shortage of homes built during the recession would cause supply to be tight and so support an upturn in average prices, the report said.

"The key question now is the extent to which rising unemployment and weak wage growth will lead to a second wave of house price falls, or whether this has already been built in to existing expectations," said Benjamin Williamson, one of the report's authors.

"Our view is that the extent of house price falls already seen means further significant falls are unlikely."

From their peak in the third quarter of 2007 to a predicted trough in the first three months of 2010, prices would have fallen by 24%, the report said.

Both the Nationwide Building Society and the Royal Institution of Chartered Surveyors have suggested that UK house prices could end 2009 higher than they started it.

Predictions in recent weeks have ranged from a price rise of 5% this year, according to Ray Boulger of mortgage brokers John Charcol, to a drop of 10%, according to Capital Economics.

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