Seven years until homes regain their 2007 values, says Knight Frank

It will then take the average house until 2015 to return to its 2007 value, as long as 2017 in Northern Ireland, with houses in central London recovering by 2012.

Assuming that we are currently in the middle of the credit crunch, it predicts that UK residential prices will fall 30% from their peak, taking values back to September 2003 levels before they go up again.

Liam Bailey, head of residential research at Knight Frank said: ‘The central question for anyone who owns their own home is – when will prices stop falling? Our forecast suggests that we will be closing in on the bottom of the market during late 2009 / early 2010.

‘Prices in the UK peaked in late 2007 and have fallen sharply since that point. Our forecast suggests that we are now at least half way through the process of price falls, with around 15% of an estimated 30% peak-to-trough decline already factored into prices.

‘Some markets are experiencing very different conditions from the national or regional average. The regional new build sector has already seen substantial price falls, with examples of 50% or more in several locations. It looks as if price declines are already coming to a close here – with investors sensing that “fair pricing” is almost at hand.'

Other key findings include:

• Sales volumes will hit a low point in late 2008, at only around 30% of their long term average
• Sales volumes will recover to reach 60% of their long run average by the second half of 2009
• Development land values outside London are already down 33% from their peak, with a further 15% to go in 2009
• Equity rich investors and speculators are already in the market, targeting distressed land and property sales
• The top of the agricultural land market has been reached, Knight Frank expect price falls of up to 10% from the 2008 peak

Bailey added that the UK does ‘not have the oversupply problems of Spain and the US, and, indeed, a shortage of housing will become more apparent with time,’ which will drive sales again.

He said that now many potential buyers were ‘watching the residential market closely’ and ‘desperate not to miss the floor when it comes.’

‘The winners in this market will be anyone with equity who can buy over the next six months. Those requiring significant finance will be unlikely to be quick enough on their feet. Vulture funds and cash-rich individuals will be the first to benefit.

‘It may be hard to stomach but opportunistic buyers are looking for distressed property sellers.

'They are interested in individual properties – repossessions in particular – and also development land, or even newly completed developments. In fact, anything where values are felt to have fallen as far as they are likely to,’ he said.