House prices are set to fall a further 36% over the next two years in what could amount to the worst post-war housing crash, according to the price of contracts being traded on the derivatives market.

Financial markets are pricing a further 22% fall in the housing market over the next 12 months, with another 14% in 2010, before flattening out in 2011.

Figures derived from trades on the HBOS House Price Index show traders are betting on the housing market falling far more over the next two years than the majority of commentators have so far forecast. If the fall is realised it would amount to a halving of house prices from its peak last year to the bottom of the market. The derivatives market also suggests it will take 10 years for prices to return to their current levels.

Daily Telegraph