The fragile economic recovery looks set to disrupt the housing market during 2011 leading to property price falls, it was predicted today.

The Centre for Economics and Business Research (CEBR) says house prices rose by 6.4% during 2010, but it predicts the market recovery will stall this year, triggering price falls of 1.7%.

It says weak growth in disposable incomes and higher unemployment throughout 2011 will trigger house price falls, particularly in regions that are most vulnerable to public sector cuts.

But it says affordability for first-time buyers will reach an eight-year high as house price growth weakens and mortgage interest rates stay at record low levels.

Mortgage lending is expected to remain low next year as demand is muted and households focus on paying down their debt and increasing their savings levels.

But house prices should begin to rise again in 2012 as banks relax their lending criteria further and consumer confidence recovers.

The group expects property prices to rise by 2.3% in 2012, followed by gains of 3.7% in 2013 and increases of 4.7% and 5.5% in 2014 and 2015, respectively.

Douglas McWilliams, chief executive of the CEBR, says: "We expect house prices to grow tentatively over the coming years, given that household incomes are being squeezed and banks are still wary of lending.

"There is currently significant uncertainty in the market caused by the Government's spending cuts and a choppy recovery, which has greatly impacted transaction levels."

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