But at the same time there might also be a 10% increase in transactions in the property market as recent surveys indicate it may have reached the bottom, says the report from the Royal Institution of Chartered Surveyors.
It is the on-going caution shown by lenders and the worsening economic climate that will keep prices falling, the report indicates. There are enquiries but it is lack of finance that is preventing them turning into sales.
But with mortgage approvals currently hovering just above 30,000 per month compared to the 129,000 seen at the height of the most recent boom in 2006 and now at 64% lower than 12 months ago, the Government needs to secure an adequate supply of mortgage finance for credit worthy borrowers.
Meanwhile, house building is set to continue to shrink throughout 2009. New housing starts for 2008 are unlikely to be much above 110,000, a figure far lower than recorded during the recession of the 1990's, and output is set to plunge to a new low in 2009 with new starts expected to fall under the 80,000 mark.
This figure is well below the Government's target for building two million new homes by 2016 and highlights the risk of yet more house price volatility in the medium term.
'Lenders are likely to remain cautious in the near term in the absence of any guarantees on mortgage backed securities. This, coupled with an increasingly gloomy economic picture, suggests that house prices will continue to decline in 2009,' said RICS chief economist Simon Rubinsohn.
'However, transaction levels do seem to have hit a floor with some signs that opportunistic investors are returning to the market. We expect a modest rise in sales over the course of the next year from the very low levels seen in recent months,' he added.
'A major concern is the massive reduction in the number of new homes now being built. It is likely that there will be even fewer new starts in 2009 leading to a very real risk that a serious housing shortage will fuel another bout of volatility once the current crisis eases. Crucially, the policies are not yet in place to create a vibrant but sustainable housing market in the future,' he concluded.
