2.5m homeowners face negative equity as prices are set to drop by 25%

House prices will not reach the 2007 levels at which they peaked, until 2013, the Centre for Economics and Business Research (CEBR) has announced.

salesign_ld

The centre has predicted that prices will continue to fall, reaching their lowest in 2009, and decreasing in value by 25%, resulting in 2.5m homeowners facing negative equity.

The CEBR's prediction would result in the value of the average home dropping to £157,058 by the end of 2009, representing a decrease in value of around £50,000 from its peak in the housing market only a year ago.

During 2010, prices are expected to remain flat, but will rise by 20% throughout 2011 and 2012.

A lack of will from banks to lend to one another has been blamed as a key factor in determining house prices, the CEBR said.

The new forecast echoes comments made last month by Graham Beale, chief executive of the Nationwide Building Society.