House prices could fall another 20 per cent.

The renewed downturn in house prices is unlikely to be short-lived, according to Capital Economics.

Not only is the market still significantly overvalued, but the lack of mortgage credit and the weak economic outlook also point to prices falling through the remainder of this year and 2011.

Ed Stansfield, chief property economist, commented: “The outlook for house prices is one of sustained weakness. We believe that the rebound in house prices lacked any firm foundation. Thus, at the very least, we expect house prices to drop back to their early 2009 lows.

“However, with most measures suggesting that prices are still significantly overvalued, we think that house prices could well fall 20% from here. 

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