by business editor Trevor Sturgess

House prices fell by two per cent this year and will continue to dip in the early part of 2011, according to the Royal Institute of Chartered Surveyors.

But the RICS UK Housing Market Forecast, published today, said the South East, London and East of England had proved the most resilient parts of the country.

It predicts that the region will continue to outperform the rest of the UK, with "prime" property likely to perform better than other categories.

Generally, transactions were likely to remain flat, while repossessions will decline marginally.

While average prices were expected to slip in the coming months, it predicts that falling supply should stabilise the market at some stage in the first half of 2011.

It expects prices to edge up again in the latter part of the year and to end 2011 at today's levels.

But it warns that public spending cuts could lead to higher unemployment than anticipated and depress buyer interest.

However, the lack of housing supply will prevent the decline in prices being more than five per cent.

Simon Rubinsohn, RICS chief economist, said: "The lack of supply in the market is likely to prevent significant house price declines in 2011.

"The narrowing gap between supply and demand will see the gentle downward trend in prices currently taking place at least partly reversed as the year wears on.

"Transactions levels will remain flat as mortgage lending remains subdued for another year with many first-time buyers struggling to meet their aspirations of home ownership."