House prices
Britain\'s struggling economy is holding back the property market (Reuters/Toby Melville)

House prices will remain stagnant for most of 2012, a mortgage lender predicted.

Prices have been relatively flat over the past 18 months, with latest figures from Nationwide showing a 0.2 percent dip in January.

"If you look over the last 12 or even 18 months, you've seen very weak demand for homes because of the weak economic backdrop, especially because of what you've seen in the labour market," Robert Gardener, chief economist at mortgage lenders Nationwide, told International Business Times UK.

Households' cost of living is also very high, while wages remain unchanged.

Britain's economy contracted by 0.2 percent in the last period of 2011, with forecasts of a full recession in the first half of 2012.

To top it off, the crisis in the eurozone remains unresolved, which is holding back recovery in the UK.

"It's not surprising that buyer confidence has remained pretty weak, with a difficult economic backdrop, pressure on budgets, uncertain economic outlook, consumer confidence at very low levels, and people reluctant to make a major purchase and step into the housing market - you can see why people are staying on the sidelines," Gardener said.

"It looks like it's going to be a very similar 2012 to what we saw in 2011, to be honest," he added.

The government is trying to stimulate demand in the housing market.

It recently announced its mortgage indemnity scheme, which will see it support lenders to give first-time buyers mortgages with a low deposit level on new builds. At the moment, first-time buyers can expect to make deposits of around 20 percent of a property's value.

This is a good thing, Gardener said, though he admitted that it will not kickstart the market.

"Fundamentally the thing that we need to see happen is the economy turn around, because that's really going to make a difference in terms of persuading people to feel more confident about their own circumstances," he said, adding that they need to feel secure enough to take the plunge and buy a property.

Gardener also pointed out that house prices are generally high in comparison with people's wages, which is further affecting the property market.