The outlook for the UK housing market has darkened in recent months, according to the London-based Centre for Economics and Business Research (CEBR), which revised its forecast to say prices will fall this year.
Home values will drop 1.7pc in 2011 to an average £175,416 (€208,352), compared with a November forecast for a gain of 2.2pc, CEBR said last night. It cut its prediction for gains through 2014 to 9.1pc from 16pc.
Data last week showed home values fell for a fourth month in January, and former Bank of England policymaker Kate Barker said on Friday that prices may extend declines this year as Britons' confidence weakens and banks restrict mortgage lending.
The CEBR said that rising unemployment and "anaemic" income growth would curtail property demand this year.
"We expect house prices to grow tentatively over the coming years, given that household incomes are being squeezed and banks are still wary of lending," CEBR's chief executive officer Douglas McWilliams said.
"There is currently significant uncertainty in the market caused by the government's spending cuts and a choppy recovery, which has greatly impacted transaction levels."
The CEBR said values would rise at a "slow pace" from 2012 onward as banks relaxed lending criteria and consumer confidence recovered.
The Bank of England kept its bond-purchase plan unchanged at £200bn and its benchmark interest rate at a record 0.5pc last week after the economy contracted in Q4. (Bloomberg)