Firm predicts average drop of 7% next year, as unemployment rises and mortgage lending remains weak

House prices are likely to tumble again in 2010 in spite of improved confidence in the market, according to a new forecast from Jones Lang LaSalle.

The firm’s latest predictions for the residential sector anticipate average falls of 7% next year as unemployment rises and mortgage lending remains weak.

Head of the company’s residential development and investment team, James Thomas, said the “seemingly irrational” lift in prices was likely to be unsustainable. The value of the average home has increased by 8% in the past six months.

Thomas said: “The unforeseen and seemingly irrational pick-up in prices has altered the outlook for UK house prices but it is likely that this recovery will prove temporary.

“The economic fundamentals that have supported the upturn, most notably the constrained supply of housing for sale, will be eroded as unemployment hits a peak and mortgage lending remains weak.”

However, the firm said it expected the market to bounce back in the long-term to average rises of 6% per year owing to the predicted increase in the UK population of 9 million people over the next 25 years.

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