POLL - House prices to tumble as boom turns to bust

By Jonathan Cable

LONDON (Reuters) - House prices are likely to fall 7 percent this year and will probably tumble 20 percent from their highs before they start to recover, a Reuters poll found, in more evidence that a decade-long boom has turned to bust.

The poll of 27 analysts at banks, investment firms and research institutions found forecasts for 2008 as a whole ranged from a 20 percent fall to a 2.2 percent rise, with a fall of 8 percent predicted for next year.

The poll found economists predicting the market would fall 20 percent from peak to trough, with a few saying the correction would be as much as 35 percent.

A Reuters survey in May predicted just a 5 percent fall in house prices this year, while a poll in October forecast a 2.2 percent rise, highlighting the rapidly deteriorating outlook for the once-booming property market.

But the figures may already be understating reality. Data released by the Halifax mortgage lender earlier on Thursday showed house prices fell for the sixth month in a row in July and by a sharp 1.7 percent.

Some are now concerned that the economy is heading for a bust similar to the one that is in full gear in the United States, where prices are already falling more than 15 percent on one measure, the worst on record.

The Reuters poll found a 50 percent chance of that happening, up sharply from 30 percent in the May survey.

"We think that in most respects the is undergoing a U.S.-style housing correction," said David Page, economist at Investec, who expects house prices will continue falling until the end of next year before finding a bottom.