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Double dip on the way, claims economic group

House prices will fall 10% next year and a further 5% in 2011 as job losses climb, says Capital Economics.

The notoriously downbeat forecaster – it is being so gloomy that keeps it going – says that rising unemployment together with mortgage illiquidity will be responsible for a new wave of house price falls.

Capital Economics admits that the housing market is now showing signs of turning around, but adds that the recovery is unsustainable because of severe job cuts ahead in the public sector.

It also warns of a downside to a rapid recovery.“While we may be underestimating the potential for an economic recovery, stronger growth would be accompanied by higher interest rates. That would only add to the pressure for lower house prices,” it said.Its prediction of 15% house price falls in two years is in line with the warning by ratings agency Fitch which two weeks ago forecast a further 17% fall.

 


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