JLL forecast of 14% price fall this year and further fall next defies recent signs of market improvement

House prices could plunge 14% before the end of the year and continue to fall during 2010, according to the latest report on the sector.

The latest forecast from property agent Jones Lang LaSalle (JLL) predicts continuing falls in prices of up to 3% next year, casting doubt on recent reports of tentative signs of market improvement.

James Thomas, head of JLL's residential investment team, said: “It is important to remember that the recent green shoots of recovery are still very green. The UK economy is still in dire straits and it is unlikely that the full impact of declining employment has yet hit the housing market.”

JLL's pessimistic outlook comes hard on the heels of a raft of bullish data. Mortgage lending enjoyed a month-on-month increase of 29% during March and the National House-Building Council said new-build housing applications jumped 10% in the three months to the end of April, compared with the previous quarter.

Sale boards
Prices are forecast to fall a further 3% next year

But Thomas said: “The current fillip is only temporary and due to the sharp fall in interest rates, improved affordability and activity from overseas investors taking advantage of the weakness of sterling.”

JLL forecasts that London will lead the housing market recovery, with positive house price growth in the autumn of 2010, and will experience the strongest house price recovery during 2011-12, partly thanks to the Olympic Games.

The Midlands and North will be slower to recover. By 2010 it is expected that average house prices will be 28% below their 2007 peak and this will encourage new demand - in particular first-time buyer demand - supported by a more stable and generous mortgage market.

Overall UK residential price growth is forecast to be 4-6% during 2011, increasing to around 9% during 2012-13.