House prices look set to continue falling during the coming year as government spending cuts bite and the problems in the mortgage market continue, economists said yesterday.

The Financial Times said 50 out of the 56 economists it interviewed who expressed a firm view on house prices predicted further falls, with just six expecting values to rise.

But economists are expecting declines of between five and 10 per cent as households struggle with tight finances, rather than a house price crash.

Separate research by estate agent Savills also warned that house price falls were likely to be worst in the north, where the housing market is already under pressure and public sector spending cuts will have most impact.

Andrew Goodwin, of Oxford Economics, told the FT: “Last year’s supply shortage has been corrected, which has taken away the major support to prices, but, while the market fundamentals remain weak, they are more favourable than they were in the house price crash of 2008.”

Ian McCafferty, chief economist of the CBI, said sales volumes were likely to be hit harder than prices due to the absence of distressed selling.

The London property market is expected to continue to perform better than house prices in other areas of the country, with three-bedroom semi-detached homes outside the capital expected to be the worst hit as a result of public sector cuts.

House prices fell by 20 per cent between 2007 and their trough in 2009, but they went on to claw back around half of those losses as a shortage of homes on the market helped to underpin prices.

But the cost of property edged down again during 2010, to leave house prices at around the same level they started the year.

Economists’ forecasts for house price changes for 2011 range from falls of 10 per cent, followed by further double-digit losses in 2012, to rises of two per cent.

In research carried out for the Daily Telegraph, Savills warned that the housing market in the North East and the North West looked set to suffer most from government spending cuts.

It said housing transactions in these regions were already running at less than half their average during the five years before the credit crunch struck, while repossession figures and new development starts were among the worst in the country.

The group said around 410,000 public sector jobs and £81 billion of spending would be cut in the UK during the coming four years, with the north likely to suffer from the impact of this more than the south.

Around 23 per cent of the workforce in the North East is employed by the public sector, falling only slightly to 21 per cent in the North West.

Lucian Cook, director in residential research at Savills, said: “The areas with high repossession levels are exactly those where turnover has been at its lowest and where buyer demand has been at its weakest.