Falling economic output, rising unemployment and fragile consumer confidence will all do their bit to undermine house prices this year. But while housing is still overvalued, low interest rates and widespread lender forbearance mean that a long, gradual decline is more likely than a slump. Our forecast is for prices to drop by 5% this year and by a similar amount in 2013. Housing market activity, which has weakened in response to the end of the stamp duty holiday and is unlikely to be kick-started by the NewBuy scheme, will remain subdued.
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