CB Richard Ellis said it would be 2014 before the housing market fully recovered, though the UK would see upward movement in house prices in 2013.
London is expected to outperform other regions with house price growth of 8.6% due to its attractiveness to international buyers and its role as a UK employment hub. Wales, the Midlands, the North West, Yorkshire and Humberside will be the hardest hit as these areas contain cities reliant on public sector employment. Northern Ireland will fare the worst with falls of -4.5% said CB Richard Ellis.
House prices have risen by more than 15% in the past 17 months and are now only 8.6% below the October 2007 peak, the firm said.
“While house price rises have improved consumer confidence and led to an increase in the number of properties for sale, the £113 billion fiscal tightening programme outlined in the emergency budget will increase unemployment and decrease household income, which will have a major impact on the future trajectory of the housing market,” it added.
Jennet Siebrits, head of residential research at CB Richard Ellis said: "At the beginning of 2010, we predicted a year of two halves for the UK housing market. Fading optimism has caused house price growth to slow and the mortgage market is still severely constrained despite a slight easing of credit. The latter is set to worsen as Bank of England support is withdrawn and the banks continue to refinance.
"In a thin market with few transactions, shifts in price movements are quite common and can reflect small changes in demand and supply rather than the wider economic background. The low interest rate environment minimised forced sales by keeping down repossessions and the pickup in prices can be attributed to the supply and demand imbalance rather than a genuine market revival.
"The UK will not experience a fully fledged recovery until 2014 and it is unlikely that house prices will reach the highs seen at the peak of the market until 2015 or 2016."
