LONDON House prices will fall another 4 percent before stabilising next year as a tough economy dampens demand and nervous sellers stay away, a Reuters poll showed on Wednesday.
The results of the poll of 23 market watchers, taken over the past week, will make grim reading for homeowners who bought their property at the height of the boom four years ago and have already seen around 20 percent wiped off the value since then.
"We suspect that consumers' squeezed purchasing power, tightening fiscal policy, a softening labour market and worries over the economic outlook will limit potential buyers and weigh down on house prices," said Howard Archer at IHS Global Insight.
"These factors are seen outweighing the support to house prices coming from extended very low interest rates."
Banks have been reluctant to lend, imposing harsh conditions on new mortgages, and despite record low interest rates, demand has tailed off as the economy stutters out of a deep recession and as tough government austerity measures bite.
Housing is a bedrock of consumer wealth in Britain and average house prices tripled during a property boom in the 10 years to 2007.
That bubble, which many denied even existed, burst.
Prices, which were virtually flat in the first half, are expected to fall 1.5 percent this year as a whole and flatline next year, according to the poll. That compares with forecasts in a June poll for a 2.0 percent drop in 2011 and stable prices in 2012.
House prices in London, where demand nearly always tends to outstrip supply, are expected to rise modestly next year.
U.S. house prices, which have plunged by more than a third since the bubble burst four years ago, are also expected to fall further, before rising modestly in 2012, according to a Reuters poll published earlier this month.
British house prices fell 1.2 percent in August, mortgage lender Halifax said earlier this month, while their house price to earnings ratio -- a key affordability measure -- fell to 4.4 in August, its lowest since April 2009.
The Bank of England is not expected to raise its benchmark lending rate from a record low 0.50 percent until 2013 at the earliest.
"The market is beginning to look very attractive, certainly from the point of view of funding an existing mortgage, although the barriers to new entrants remain high," said Peter Dixon at Commerzbank.
"Not only are houses expensive relative to incomes but lack of credit availability means that first-time buyers have to put down prohibitively high deposits."
And things are unlikely to get better anytime soon as the poll showed monthly mortgage approvals, a good gauge of future housing market activity, at around 50,000 in six months, and just nudging up to 55,000 in 12 months.
That was unchanged from a poll taken in June, and is less than half the average of 104,000 seen in 2007 before the market crashed.
Housebuilder Taylor Wimpey (TW.L) said on Monday sales in recent weeks had been encouraging, and peer Barratt Developments (BDEV.L) said last week it expected to make further progress in a tough housing market.
Estate agents were holding an average of 78 unsold homes, according to property website Rightmove. That did not stop Park Place in Henley-on-Thames, west of London, selling last month for 140 million pounds, making it Britain's most expensive home and worth the same as about 600 average priced homes on the website.
Respondents felt UK house prices were generally still a little overvalued, rating them a median six out of 10 where one was extremely undervalued and 10 was extremely overvalued -- unchanged from June's poll.
"The fact that house prices haven't moved much over the last year is a good indication that current prices are close to fair value," said Ray Boulger at mortgage advisor John Charcol.
Our top photos from the last 24 hours.