House prices will have dropped by a third from their peak value before a recovery begins, according to the Ernst & Young Item Club's winter forecast.
Property in the UK will decrease in value by a third from peak to trough, a new report has claimed.
The Ernst & Young Item Club's winter forecast suggested that 2009 will see 16 percent of the value knocked off homes and a further six percent will follow next year, marking an overall drop of 33 percent from highs in 2007. The study blamed the general lack of mortgage availability to homebuyers and remortgagers - a knock-on effect from the credit crunch - for driving prices down.
"The housing market remains in dire straits, starved of new mortgage finance," said Peter Spencer, chief economic advisor to the Ernst & Young Item Club. "Net lending will remain at negligible levels until overseas mortgage-backed loans are repaid. Although bargain hunters are active, there seems very little reason to buy until house prices stop falling. We do not see that happening until the end of 2010."
It is not just the property market that will be gloomy in the coming months, according to the report. Some 3.4 million people will be out of work in 2011, while the recession could develop into a depression without government help.
In addition, the Item Club said that the Bank of England's Monetary Policy Committee should lower interest rates further, towards the zero mark.
