House prices will take five years to regain 2007 levels, says NHF

House prices will not return to their pre-slump levels until 2014, according to new research from the National Housing Federation (NHF).

The research predicts that, despite most mortgage lenders reporting price stabilisation, overall house prices will fall 12.2% this year and a further 4.6% next.

The research finds that house prices in England in 2013 will be 3% below their pre-credit crunch peak of 2007, but by 2014 they will be 3% higher. It says that recovery will start in 2011 with 1.1% rise, followed by rises of 7.5%, 8.4% and 6.8% in the three subsequent years.

This means that homeowners who bought in 2007 may have to wait until 2014 until they emerge from negative equity. According to the NHF, the downturn has increased housing need.

NHF chief executive David Orr said: “While house prices are falling in the short term, they will inevitably increase in the long term because of a fundamental undersupply of housing. We welcome the government's recent promise of a national affordable house building drive, but if we are to avoid run-away house prices in the future when the economy picks up, ministers must ensure we build the right numbers of homes for social rent now, so that housing supply meets demand.”