The combination of a fading economic recovery, renewed rises in unemployment and a continued shortage of mortgage credit all suggest that there is little prospect of a meaningful recovery in housing market activity levels in the next year or so. The longer that activity levels remain soft, the greater the downward pressure on house prices will become. While low interest rates make calling the speed of any renewed adjustment in prices very difficult, our central forecast is for a 10% drop in 2011, with further falls to come in 2012.
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