5:02pm UK, Tuesday May 13, 2008

Houses prices are expected to fall by up to 10% in the next year but ministers are being warned the slump in the market could be even worse, according to a briefing seen by Sky.

180 house for sale sign property market generic

'Sizeable falls this year'

The document, obtained by Political correspondent Niall Paterson, says: "We can't tell how bad it will get.

"Given present trends they (house prices) will clearly show sizeable falls in prices later this year - at best down 5-10% year on year."

Cabinet ministers, who received the briefing were told: "We need to plan now to put in place effective measures against the risk that it does get worse.

"It is vital that we show that at this time of uncertainty we show we are on people's side."

The document also says that repossessions are rising and that construction is slowing down with builders predicting further delays.

Paterson says people need to know if the Government has strategy in the event of a collapse of the housing market.

"This all paints a very bleak picture indeed. More woe for Mr Brown at the worst possible time.

"And plenty of questions, no doubt, about the Government's confidence in the UK economy's ability to weather the downturn."

Downing Street did not deny the existence or the content of the briefing paper.

The Prime Minister's spokesman said: "It's not our policy to comment on leaked documents."

But a spokesman for the Department of Communities and Local Government said they were not Government figures.

"When looking at trends in the market, it is important to remember that UK house prices are 45.5% higher than five years ago," he said.

"This is a partial and therefore misleading account of the notes.

"The notes make clear that the fundamentals of the economy are sound, with high employment and low inflation, but as everyone knows the market is being affected by the global credit crunch.

"It also makes clear a comprehensive strategy is in place and the Government will continue to monitor the situation and take appropriate action."