House prices 'may not rise until 2010'

A leading investment bank has warned that homeowners face years of stagnating house prices, with property values not rising again until at least 2010.

But, highlighting the uncertainty, the bank added that there was a slightly lower chance that prices could rise by five per cent next year and by one per cent each year until 2010. It put the chances of a five per cent rise next year, followed by 10 per cent increases in 2006 and 2007, at 15 per cent.

The report comes a day after one of the City's most successful fund managers, Neil Woodford of Invesco Perpetual, predicted a 30 to 40 per cent fall in house prices within the next four years.

Meanwhile, separate reports from Nationwide and Woolwich revealed that public confidence in the housing market fell for the fourth month in a row last month in response to rising interest rates. Both mortgage lenders said just over half of homeowners expect the value of their property to rise in the next six months, down from twothirds in the spring.