UK house prices yet to fall by 20%

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A new report from a leading credit rating agency makes uncomfortable reading for UK homeowners.

According to Fitch, UK house prices have yet to topple 20% before bottoming out some time in 2010.

A peak to trough fall of 30% is expected by the firm, plunging millions of households into negative equity as the average property value declines to around A?130,000, based on the Nationwide index.

Last month the UKa��s housing market rally was called into question by Ernst & Young Item Club.

The economic forecasting unit warned that the price rises seen in recent months are a false dawn and that the average value of a home will not revisit to its 2007 peak for at least another five years.

According to the group, a scant supply of properties for sale along with a small number of a�?cash-richa�? buyers have forced up prices; however, prices are likely to fall again in the first half of 2010, followed by a two year period of stagnation.

A report from Jones Lang LaSalle (JLL) is predicting a similar outlook.

Analysts at the real estate and investment management firm see the current rally as “irrational” and are forecasting a W-shaped recovery of the market.

In this scenario, the company expects prices to remain flat in 2009, drop by around 7% in 2010, and only begin a sustained recovery in 2012.

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