It will be two years before house prices begin to recover, it has been predicted.

The National Housing Federation forecasts that prices in England will fall this year and next before recovering,

It expects prices to fall 12.2% in 2009 and 4.6% next year, before stabilising in 2011 with a 1.1% rise and continuing to climb in the following years.

However, it predicts that, by 2014, house prices will be 20% higher than current values.

But the group, which represents housing associations, said English homeowners who bought at the market peak could be in negative equity for five years.

-- Advertisement --

Although five-year forecasts can be unreliable, the group said that not enough homes were being built.

The group has suggested that house prices would fall sharply this year. This was in stark contrast to the view of the Nationwide Building Society which said there was a "reasonable chance" that prices in the UK could end the year higher than they were at the start of 2009.

The reversal in 2011 would accelerate in 2012 with a 7.5% increase in prices, the NHF said, followed by rises of 8.4% in 2013 and 6.8% in 2014.

That would mean that English homeowners who bought at the height of the property boom would be in negative equity until 2014.

"Our research shows that, while house prices are falling in the short term, they will inevitably increase in the long term because of a fundamental under-supply of housing," said NHF Chief Executive David Orr.

(BMcC/KMcA)