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House prices could plummet by almost 40 per cent as Britain faces a crash similar to that in the 1990s, a leading professor at the London School of Economics has warned.

A possible Brexit -sparked recession coupled with a fall in real earnings, could cause a double blow to homeowners and put them at risk of 'negative equity' - meaning that the value of their home is less than the cost of their mortgage.

Professor Paul Cheshire, Professor of Economic Geography at LSE, warned the property market could collapse as prices reflect the decline in earnings.

He said house prices can be triggered when wages fail to keep up with inflation - and last month inflation hit 2.9 per cent, while incomes grew by 2.1 per cent.

"We are due a significant correction in house prices," Prof Cheshire told the Mail on Sunday . "I think we are beginning to see signs that correction may be starting.

(Image: Getty Images Europe)

"Historically, trends seem always to start in London and then move out across the rest of the country. In the capital, you are already seeing house prices rising less rapidly than in other parts of Britain."

His warning comes not long after a report by the National Association of Estate Agents found that the number of homes sold in May for below the asking price climbed to 77 per cent.

Prof Christian Hilber, economic geography professor and former Government housing adviser, also said: "If Brexit leads to a recession and/or sluggish growth for extended periods, then an extended and severe downturn is more likely than a short-lived and mild one."

Prices fell by 37 per cent after the housing bubble burst in 1989.

Earlier this month, the Council of Mortgage Lenders said the housing market "stalled".