2.5m homeowners face negative equity as prices are set to drop by 25%

House prices will not reach the 2007 levels at which they peaked, until 2013, the Centre for Economics and Business Research (CEBR) has announced.


The centre has predicted that prices will continue to fall, reaching their lowest in 2009, and decreasing in value by 25%, resulting in 2.5m homeowners facing negative equity.

The CEBR's prediction would result in the value of the average home dropping to £157,058 by the end of 2009, representing a decrease in value of around £50,000 from its peak in the housing market only a year ago.

During 2010, prices are expected to remain flat, but will rise by 20% throughout 2011 and 2012.

A lack of will from banks to lend to one another has been blamed as a key factor in determining house prices, the CEBR said.

The new forecast echoes comments made last month by Graham Beale, chief executive of the Nationwide Building Society.