The ups and the downs - click here to see how property prices have fared

Nobody doubts the British housing market is turning – the only question is how fast and sharp that turn will be. In the next few weeks, economists, housing analysts, estate agents and commentators will be consulting their spreadsheets and crystal balls to predict what will happen to prices in the next year.

Forecasting movements in property markets is a difficult business. This time last year, for example, even the most bullish of estate agents failed to predict that prices at the top end of the market in London would rise by an astonishing 50% in 2007. Most also underestimated the increase in prices as a whole – up by 9.4% compared to 12 months ago, according to the latest Land Registry figures.

On the other hand, nobody predicted the “sub-prime” financial crisis, which spread from its origins in the trailer parks of Florida to hit confidence across the world and push up mortgage rates in middle England.

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Do you have the clout to tough out the downturn? Emma Wells and Lucy Denyer sort victors from victims

BACKGROUND

• Housing market analysis: the plight of first-time buyers

• Home economics - January's shock house price stats

• Home economics - the property market

• The harder they fall

• Home economics

BACKGROUND

• Wise up to size

• The property market: October 21, 2007

• Shires fall to foreign land rush

• House price gloom as the wealthy turn away

How to beat a property market slowdown

The market is cooling. But learn the rules and it could work to your advantage

• Why won't my house sell?

BACKGROUND

• Empty homes: the mystery of the UK’s million vacant homes

• Opening bids: Why the Government must do something about Britain’s empty properties

• It’s dire in the shires

• Cash in on your biggest asset

Smoking ban: a drag on prices?

Paula Hawkins examines whether house prices have gone up in smoke

BACKGROUND

• Misery for over-extended and over-indebted

• UK house market is ‘heading for crash’

• The property market: October 14, 2007

• Held to ransom

There are undoubted signs of a broader economic slowdown, due largely to that crisis, with the next move in UK interest rates expected to be down rather than up. Banks are tightening their lending criteria, which will hit Britain’s own “sub-prime” borrowers – among them those investors who have mortgaged themselves up to acquire buy-to-let properties. With next year’s City bonuses expected to be smaller than this year’s, even some of the usually ebullient agents who work the exclusive end of London’s property market are beginning to adopt a more thoughtful and guarded tone.

So, what will happen in 2008?

Royal Institution of Chartered Surveyors (Rics)

Confidence is at its lowest level since June 2005, says Rics, which is revising down its predictions for growth next year from 3% to zero. “It is conceivable that prices could fall,” says Simon Rubinsohn, chief economist at Rics. “The real risk of a more material downturn in the market lies in the possibility of an extended credit crunch that gradually begins to affect the real economy.”

2008: 0%

Nationwide

House prices defied gloomy expectations, with the September index showing a 0.7% increase, but the longer-term trend growth was the lowest since July 2006.

“We are expecting a slowdown the rest of this year and into next year,” says Martin Gahbauer, senior economist at Nationwide. “The rate of house-price growth will drop below the rate of earnings growth, which is 3% to 4%. The underlying momentum is fading, but it is still too early to predict falls.”

2008: 4% to 5% (to be revised in mid-November)

Hometrack

The property consultancy will not announce its complete forecast for next year until the end of the month, but it says that it is likely to be “slightly lower” than the 2.5% rise it has so far expected for 2008.

“For some time now, we have been predicting a prolonged period of single-digit growth,” says Richard Donnell, Hometrack’s research director. “The boom in the past 18 months has only been in London. If you live in Manchester or the northeast, prices have been slow all year.

“This will spread out to the rest of the country next year. Anywhere that saw prices rise dramatically because it was so cheap in the first place will see falls in the next six months.”

2008: in line with inflation

Savills

This summer’s financial crises have dented the top end of the market, according to the agency’s property analysts. Earlier this year, they predicted prices in prime central London would rise by 20% in 2007; they have just trimmed that to 18%.

“We expect the froth to come off the market, and for demand and supply to be more closely aligned,” says Lucian Cook, director of residential research at Savills. “The highest growth will be in London and the southeast. However, the next four weeks are likely to play an important part in confirming our view.”

2008: mainstream, 3% to 5%; prime country houses, 4% to 8%; prime central London, 6% to 10%

Capital Economics

The London-based consultancy has a reputation for being the most pessimistic of the number-crunchers (which meant it underestimated the the recent boom). Not surprisingly, it is decidedly bearish again.

“We forecast 0% growth in 2008 well before the ‘credit crunch’,” says Kelvin Davidson, one of its economists. “So, any growth will be offset by falls elsewhere. Once you’re at zero and things turn negative, then you start getting house-price falls.

“The housing market just can’t keep on rising. Price growth has slowed, if not stopped, in the Midlands and Wales already. Crash is too emotive a word, but it could slump by 10%.”

2008: 0% to -2.5% Has the overseas buy-to-let bubble burst?

Local forecast

Sunny: The priciest properties in “prime central London”, and anywhere luxurious outside the capital within easy reach of a helipad, are likely to continue rising, buoyed by money from Russian oligarchs and other wealthy foreigners keen to buy property in Britain. The rate of growth is expected to slow, though.

Unsettled: Properties with good qualities on offer will fare well and should be able to weather any dips without much difficulty. On the other hand, if your look or location is not so desirable, you could find yourself stuck. Both price growth and price falls will be localised rather than regional.

Storm warning: Venture out beyond the M25 and prices have been static, if not falling, for most of the year. There could be worse to come, with the northeast, the East Midlands and Wales especially badly hit. Owners of new-builds in cities such as Liverpool, Birmingham and Leeds may be running for cover.

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