Jeremy Grantham, chief investment strategist at US asset manager GMO has warned that UK house prices could slump by a further 40%, following their 8% fall over the last year.

He said the price correction could also take the form of stagnant house prices for seven years before they reach fair value equivalent to 3.5 times family incomes. The current multiple is 5.5 times, following a surge in prices facilitated by low interest rates since the year 2000.