Rising unemployment and a failure of mortgage lenders to offer cheap home loans will mean property will stay unaffordable for too many consumers, forcing prices down in a "second wave of house price falls"- at least that’s the story facing the UK according to Capital Economics who predict that house prices will fall by 10 per cent next year and 5 per cent the following year, taking the average price from £163,500 – on the Halifax house price index – to below £139,000 by the end of 2011.
 
The prediction implies that house prices will, having recovered in recent months, fall to below their trough back in April, when they hit a low of £154,500.
Capital Economics, warns of the downside of a rapid recovery in the economy. "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,"
Ratings agency Fitch has also predicted house prices had a further 17 per cent to fall. Fitch argues that prices, despite their fall from the peak of the summer of 2007 when they hit £199,000, are still too expensive, when compared with the average earnings of British workers.

The severe shortage of houses on the market – as cautious owners hold back from selling at depressed prices – created caused a strong recovery in recent months. In some areas such as Oxfordshire and London estate agents have even reported a return of gazumping, the practice of home buyers outbidding each other, even when the offer price has been accepted.
We agree with Capital Economics that this recovery is unsustainable, with the likelihood of severe job cuts in the public sector looming and consensus unemployment likely to climb from 2.47 million to around 3 million next year, forcing many people to sell their houses.

The big double dip is probably still coming.