Jones Lang LaSalle says house prices could plunge 14% this year and continue to fall in 2010

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.

Property agent Jones Lang LaSalle’s latest market forecast, which predicts continuing falls in prices of up to 3% next year, casts doubt on recent reports that indicated the market was showing tentative signs of improvement.

James Thomas, head of Jones Lang LaSalle’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.”

Jones Lang LaSalle'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 to the previous quarter.

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.”

Jones Lang LaSalle forecasts that London will lead the housing market recovery, seeing positive house price growth in the autumn of 2010, and will experience the strongest house price recovery during 2011-2012, partly due to the boost the capital will receive from hosting 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, and first-time buyer demand in particular, with both being supported by a more stable and generous mortgage market compared to now.

Overall it forecasts UK residential price growth will be 4-6% during 2011 increasing to around 9% during 2012-2013.