FT: House prices will drop 25%

House prices will continue to fall in 2009, taking houses price a total of 25 per cent.

In November, the FT house price index shows a 1.7 per cent monthly drop in prices and an 8.2 per cent annual drop.

All ten regions in England and Wales now show prices falling on both a monthly and an annual basis – with the slowdown in London gathering speed.

The analysis from the FT house price index suggests house prices will fall to 2004 levels before any recovery comes.

As such, Peter Williams, chairman of Acadametrics, which carries out the FT house price index, plays down the danger of high levels of negative equity and rising forced sales depressing the property market further.

"Expectations exist that there will be a further fall of around ten per cent in 2009, giving us a peak to trough reduction of some 25 per cent on average," he said.

"Were this to happen, it would bring prices back to where they were earlier in the decade i.e. roughly in 2004/05.

"Given the several million property transactions completed and mortgages advanced during this period, we can expect to see some negative equity emerge."

However, he claimed the current volume of repossession sales is small by comparison with the overall volume of transactions.

"There is no evidence to date that these repossessions, along with other auction disposals, are having a depressing effect on the market in general, but clearly there will be localised impacts," Dr Williams said.

He added with the number of government schemes coming in to aid borrowers avoid repossession, the number of people to fall behind on repayments and lose their homes was uncertain.