Government has "lost all touch with reality," opposition claims

Housing minister, Margaret Beckett, has been called “out of touch” for spying an upturn in the housing market.

In an interview with the Sunday Times, she said there were signs of an “upturn” in the property market. She also urged first-time buyers not to delay researching their purchase to avoid a “mad rush” when the economy picks up.

But housing experts said that house prices had not stopped falling. The Ernst & Young Item club, which published a report today, said that house prices would fall a further 16% this year and 6% more in 2010.

“The housing market remains in dire straits, starved of mortgage finance,” said Professor Peter Spencer, Item’s economic adviser. “Although bargain hunters are active, there seems little reason to buy until house prices stop falling. We do not see this happening until the end of 2010.

Figures confirm that the UK economy as a whole is in freefall. The Office of National Statistics (ONS) figures out on Friday are likely to confirm that the UK is officially in recession following three months of contraction.

Grant Shapps, the shadow Hosing secretary, said: “The government has lost all touch with reality. Experts say 75,000 families may be evicted from their homes this year, yet the housing minister actually seems to believe that life is getting better.

But Beckett said she was speaking based on evidence of recovery from estate agents. “Some people have been saying the appetite to buy has gone through the floor, but clearly we’ve had this anecdotal evidence of a bit of an upturn in interest.”

Beckett was probably referring to a RICS survey carried out last week saying that new buyer enquiries were at their highest since 2006.

The comments follow Baroness Vadera's misstep about her spotting "green shoots of recovery" last week.

Today the Treasury announced new moves to ease bank lending by underwriting billions in asset-backed debts, a move experts say could kick-start the mortgage market.

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