Think-tank says house prices to fall 20 percent

LONDON (Reuters) - Think-tank Capital Economics cut its already bearish forecasts for house prices in 2008 and 2009 on Monday and said the market was likely to drop by a total of 20 percent from its 2007 peak.

In a statement, Capital Economics said it was cutting its house price forecast to minus 8 percent in 2008 from an earlier minus 5 percent and to minus 10 percent in 2009 from a previous minus 8 percent.

Property economist Ed Stansfield said a 50 billion pound Bank of England scheme to inject liquidity into the UK's banking system would give only a limited boost to mortgage lending because there was no guarantee that risk-averse lenders will again loosen their lending criteria materially.

The decline in house prices was set to accelerate in the months ahead because the market was not yet reflecting a slump seen in mortgage approvals, he said.

According to a Reuters poll published on March 28, the median of 30 forecasts was for house prices to slip by 0.8 percent in 2008. The median of 19 forecasts was for prices to slide 2 percent in 2009.

Data from the biggest mortgage lender Halifax on April 8 showed house prices fell 2.5 percent in March -- the sharpest pace of decline since the recession of the early 1990s.

That was followed last week by data showing a 17 percent year-on-year fall in mortgage lending from the Council of Mortgage Lenders, which has warned that mortgage lending could halve this year due to market turmoil.

(Reporting by William Kemble-Diaz; Editing by Elizabeth Fullerton)

(See www.reutersrealestate.com for the global service for real estate professionals from Reuters).