House prices to keep falling

They are expecting declines of between five per cent and ten per cent as households struggle with tight finances, rather than a house price crash.

Separate research by estate agent Savills also warned that house price falls were likely to be worst in the North, where the housing market is already under pressure and public sector spending cuts will have most impact.

Ian McCafferty, chief economist of the CBI, said sales volumes were likely to be hit harder than prices due to the absence of distressed selling.

The London property market is expected to continue to perform better than house prices in other areas of the country, with three-bedroom semi-detached homes outside the capital expected to be the worst hit as a result of public sector cuts.