and more uncertainty about the longer-term economic outlook. People will be more wary, and wait and see what happens.”

A bleaker assessment comes from David Miles, managing director and chief UK economist of Morgan Stanley, who has predicted a 10% drop in prices in 2008. “This figure may sound dramatic,” he explains, “but, even if house prices were to fall by 10% in real terms, it would only take prices to where they were at the end of last year or the beginning of this one.”

Capital Economics, which has a reputation for bearish forecasts, expects house prices across the country to fall by 5% during 2008, with a further 8% drop during 2009. “The speed of the slowdown has surprised everyone,” says Ed Stansfield, its property economist. “The extended boom has left the market more expensive at all levels, so it is more vulnerable to a change in sentiment and a general economic slowdown. The buy-to-let brigade appear to have gone into hibernation and the huge wave of credit is at last coming to an end.”

It is this increased vulnerability, Stansfield believes, will make it more difficult for the market to recover in the second half of next year, and for house prices to continue on the upward trend that everyone has become used to. “It can’t happen that quickly this time round,” he says. “Next year will be slow, and so will 2009. There will be payback in areas that have undergone rapid price rises in the past couple of years.”

How to fight your way out of a housing market slowdown

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

Related Links

• Will further interest rate cuts boost the housing market next year?

Indeed, even the most bullish analysts are predicting a replay of the slowdown in 2005, which saw little or no growth across the country, with the market picking up again only in March the following year.

So, where will be worst hit? The Nationwide sees Yorkshire and Humberside, Wales and the southwest dipping by 1%, the north and northwest by 2%, and Northern Ireland, which has seen phenomenal growth (up 62% in Newtownards, east of Belfast) by 5%.

Knight Frank, by contrast, predicts prices will rise by 6% in Northern Ireland and by 5% in Scotland. It expects the southeast to see gains of 5%, while prices could rise by 4% in the southwest and East Anglia, but just 3% in London. Growth will be slowest in the northern regions and Wales, it says, averaging just 2% in the next 12 months.

“Buyers are already offering between 5% and 10% below asking prices, and vendors and their agents are struggling to decide how to pitch their guide prices as a result,” says Henry Pryor, founder of the property website Primemove.com. “Some areas will see values fall by as much as 40%,” he says.

“The main losers will be those who have bought in the past 12 months, and buy-to-let landlords with little experience of a downturn. Panic will overcome them, and predators will find them easy pickings. Those who buy well in 2008 will emerge as the property gurus of the next boom.”

The number of transactions will also drop sharply. Although agents are loath to release figures, anecdotal evidence suggests new buyer inquiries are close to all-time lows. Savills predicts turnover will be down by 20%; Knight Frank by 12%; Hometrack by 16.5%.

“Prices will remain static until demand and confidence return,” says Lucian Cook, director of residential research at Savills. “Low turnover will keep prices up. We’re not about to drop off the edge of a cliff. Yet.”

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