The government has been urged to take action to help stem the ongoing decline in property values.

According to the Centre for Economics and Business Research (cebr), house prices could approach their 2003 levels within the next three years if the situation does not improve.

This would represent a reduction of 40 per cent from their peak in 2007, although cebr believes greater lending could help ease this figure to 32 per cent.

Benjamin Williamson, an economist at cebr, said the current level of lending from banks following the government bailout remains "very low".

"Any improvement in lending is likely to lead to substantially increased activity and at the very least a bottoming out in house prices,"he commented.

Mr Williamson added that other factors, such as the economic recession and falling consumer confidence, are likely to accelerate the rate of house price falls.

Data published by Nationwide last week showed that house prices fell by 1.3 per cent in January, taking the average annual rate of decline to 16.6 per cent.

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