Those of a nervous disposition should look away now. If you are feeling strong enough, however, visit the Nationwide’s website and click on the “house price index” link. Thought you were sitting pretty on a £750,000 property in the home counties? Not any more. It might have been worth that (on paper, at least) at the peak of the market in the summer of 2007, but tap the details into the site’s calculator and its current value comes out at £668,244. Think your two-bedroom flat in Greater London is worth £425,000? That was a year ago; now, £383,562 would be a more accurate figure.

The methodology might be crude — the site doesn’t differentiate between types of house, or allow you to pinpoint a precise location — but it does bring home what has happened to the housing market in 2008.

So, what will Nationwide’s little gizmo (you can find it at www.nationwide.co.uk/hpi/default.asp) be telling you this time next year? With the British and world economies heading downhill and unemployment on the rise, the prospects for the property market in 2009 are not good. Almost all commentators are anticipating further falls, but predictions vary as to how far prices will drop — and when exactly they will hit the bottom.

“It will be difficult next year, because we’ll have a deteriorating economy, rising unemployment and a shortage of finance availability, which will continue the downward pressure on housing demand,” says Martin Ellis, chief economist at the Halifax. Despite all the doom and gloom, he believes the worst is behind us: after a fall of 15% or so this year, prices should drop a more modest 5% in 2009 before levelling off.

Kelvin Davidson, a property specialist at Capital Economics, a research consultancy, is more bearish. “We’ve stuck with our view that the fall will be 35%, but it’s perfectly plausible that it could be 50%,” he says. Deutsche Bank, too, expects a 35% drop from peak to trough.

Liam Bailey, head of residential research at the estate agency Knight Frank, is predicting a further drop in prices of 10% next year — on the assumption that, by the end of this year, they will have fallen by 20% from the peak reached in the third quarter of 2007. “Could I see a larger fall?” he says. “Yes. A total 40% or even 50%peak-to-trough drop is not impossible — just unlikely.”

Bailey believes that average prices in the country as a whole will return to their previous peak only in 2015. The recovery will be led by central London, where such levels should be seen in 2012. In Northern Ireland, which has seen some of the most spectacular rises and dramatic falls, homeowners may have to wait until 2019.

Generally, though, with the exception of Northern Ireland (and Scotland, where prices have dropped only modestly), the pain has been fairly evenly spread. “In this crunch, everywhere has suffered pretty much the same as everywhere else,” says Bailey. “Northern and southern England have been hit in a similar way.”

On a more positive note, he sees further price falls as good news for market activity. “Once vendors have accepted a 30%-35% fall in price and taken it off, people will begin to snap up properties relatively quickly,” he explains. “It will be a slow recovery, but sales volumes will not be as low as they were this year.”

Signs of buyer interest have already begun to feed through — earlier this month, the Royal Institution of Chartered Surveyors (RICS) reported a rise in buyer interest, while Hometrack, the property-data group, found that the number of house sales agreed edged up by 0.8% in November, after a 5.4% increase the previous month.

If history is any guide, the falling cost of borrowing — which has seen the Bank of England interest rate decline from 5.5% this time last year to 2%, with the prospect of further cuts in the months ahead — should also begin to feed through into the market. “It starts to make housing look affordable, even like good value,” says Lucian Cook, director of residential research at Savills. “This will draw buyers back in — although there is a limit on the numbers, because it will only be those who are equity-rich and are able to get hold of a mortgage.”

Predicting the housing market remains an inexact science, however: a glance at last year’s attempts (see table, right) shows that even the most pessimistic commentators expected a modest slide rather than the sharp falls we have experienced. “We didn’t anticipate the depth of the fall in prices,” admits Fionnuala Earley, chief economist at the Nationwide. “The whole market has been taken by surprise by the credit crunch and by how quickly it has swept through.”

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