Three years of house-price woe

A PROPERTY market 'rollercoaster' will see house prices in some areas plummet by £21,000 over the next three years, experts warned yesterday.

This year, the UK is likely to see prices increase by about 1.3% - a fraction of the 18.8% rise in 2004. But they will fall by 6% in 2006 and a further 2.2% in 2007 before starting to climb back towards their present levels in 2008. During the slump, some regions in particular will suffer.

Prices in the East of England are expected to fall about 13%, taking the average from £159,100 to £138,300 in 2007. They will edge back up to about £139,200 in 2008, but it may not be until 2010 before they return to their current peak.

Wales, which has seen some of the biggest rises over the last two years, will again see better than average increases of around 12% in 2005. But an 8.3% dip is predicted there next year, followed by a 3.3% fall in 2007. This will take the average price down from £157,400 this year to £139,500 - a fall of £17,900 or 11.4%.

The forecasts come from the independent Centre for Economics and Business Research, which warns that interest rate rises and higher taxes will hit hard. The falls across the country, however, will not be uniform. Greater London, traditionally the 'engine room' of the market, may face a bleak time.

Prices have already peaked at an average of £242,500, said the economic consultancy. They will slip for the next three years to reach £228,400 by the end of 2007 - a fall of £14,100 or 5.8%.

London prices will begin to rise again by 2008, but it will be 2010 before they are back to current levels. The West Midlands will fare best. The average price there will fall from £157,000 to £149,000 before bouncing back to £156,000 by 2008.

Although the centre's predictions will make gloomy reading, it insisted that it remains relatively optimistic. Managing director Mark Pragnel said: 'Although house prices will weaken in the medium term, we are not predicting a collapse.'

Mr Pragnel said a lack of new housing is helping to keep prices up.