The study by the Centre for Economics and Business Research (CEBR) claims that prices in London and surrounding areas will grow by over 2% during 2012, with the capital remaining unaffected by the UK’s return to recession.
Northern areas will fare much worse with house prices in the North East expected to plummet by 2.7%, those in Scotland predicted to fall 2.2% and North West property prices forecast to shrink 1.9%. Both Wales and Yorkshire & the Humber will also see falls in house prices.
The CEBR claims that continued uncertainty in the Eurozone and a proposal by new French President Francois Hollande to raise income tax were two of the factors behind robust house prices in the South East.
The report also expects Wales and much of northern England to suffer further falls in house prices during 2013.
The CEBR said: “Re-intensification of European financial turmoil in the last quarter has further boosted international demand in UK property, with wealthy investors seeking safe havens for their assets.”