House prices will not recover to their 2007 peak for at least a decade, according to Legal & General Investment Management.

In the gloomiest forecast for the UK property market to date, LGIM economist Tim Drayson has predicted that house prices will 'fall another 10-15% next year followed by four to five years of stagnation as incomes catch up with house prices'.

'It will be at least 10 years before we see prices return to their 2007 peak levels,' he said. LGIM, part of the insurance giant Legal & General, has been remarkably accurate with other economic predictions in the past year.

The crash in prices he is forecasting will take the total fall from the August 2007 peak to 30%. Although his prediction is among the bleaker of economists’ outlooks, the market – through property derivatives – is pricing a 50% fall from peak to trough.

Daily Telegraph