House prices could fall a further five per cent next year according a leading estate agent.
A struggling economy, public sector cuts and rising unemployment could impact property prices, say Knight Frank.
But towns enjoying rejuvenation, where jobs are being created, could see a reversal of fortunes with prices rising.
By Christmas 2012, Knight Frank believes average prices will be 15 per cent below the 2007 peak and prices across the country will not hit 2007 levels again until 2018.
In real terms, adjusted for consumer price index inflation, national house prices will have fallen 29 per cent from the peak of the market by 2015.
However, the firm is aware that some dire predictions made about 2011 had largely failed to materialise.
Grainne Gilmore, head of UK residential research at Knight Frank, says: “After falling by 15 per cent in 2008, it was widely forecast the market would dip again the following year, but this failed to happen – largely because of the drop in interest rates.
“We believe this correction is still to come, but that it has been pushed further and further out by low base rates. But next year, amid a perfect storm of a struggling economy, public sector cuts and rising unemployment, prices will fall.
“As interest rates start to rise, prices will struggle to maintain any notable growth until 2015.”
Overall, Knight Frank’s predictions assume that very low interest rates will stay until mid-2013.
Meanwhile, the latest Halifax Housing Market Confidence tracker reveals that more people expect house prices to fall rather than rise in 2012.
Some 30 per cent think the national average house price will decline, against 28 per cent forecasting a price rise.
However, most Halifax respondents expect any change in house prices in 2012 to be relatively modest, with 57 per cent predicting changes between plus five per cent and minus five per cent, and more than a quarter (27 per cent) saying house prices will be unchanged in a year’s time.
Job insecurity and problems of raising a deposit are seen as the main obstacles to home buying.
More than half (57 per cent) cited concerns over job security as a major obstacle to buying a home and a quarter (25 per cent) also identified worries over household finances as a key barrier.
Current conditions in the mortgage market continue to weigh on buyers; some 57 per cent believe concerns about raising a deposit are a major barrier to buyers.
And more people believe it is currently a buyer’s market, with 53 per cent thinking it is currently a good time to buy. Only 13 per cent think this is a good time to sell.