House prices are likely to fall year on year in 2008 for the first time since the 1990s recession, but even a sharp market downturn may have only a moderate impact on the broader economy, economists suggest. Financial Times

Most believe a long awaited correction in UK property values is on its way and 10 economists believe prices will fall more than 10% from their peak before the downturn is over. 'UK house prices finally became unaffordable at the end of 2007,' said Diana Choyleva at Lombard Street Research.

Julian Le Grand of the London School of Economics said prices could fall to five times average earnings, from the current multiple of nine, and John Van Reenen, also at the LSE, expected prices to fall 20% before bouncing back. Yet some of those predicting the sharpest falls in prices are also the most sanguine about the economy’s ability to withstand a housing downturn.

Willem Buiter of the LSE predicted prices would decline by 30% over the next couple of years, with no big effect. 'On average, lower house prices don’t make UK consumers worse off. They lose as owners but gain as renters,' he said.