HOMEOWNERS have been warned they may not see any growth in the value of their properties for several years, with some regions next year suffering their first annual price falls for a decade.

Nationwide, Britain’s biggest building society, is preparing to downgrade its expected house-price growth for 2008 to 0% and growth could be flat for a few years after that.

Previously, it thought prices would rise by 3% or 4% next year, compared with growth of 9% at present, but it now fears prices will flatline as slower economic growth and the global credit crunch take their toll. The society will make a formal forecast next month.

The news came as the International Monetary Fund (IMF) warned last week that the UK housing market is overvalued by 40% and could face a slump similar to America’s, where prices have fallen 30% in some areas.

Critics pointed out that the IMF has been warning of a severe downturn in Britain since 2002, and most UK analysts still think a crash is unlikely - although there is no doubt they are becoming more pessimistic.

Fionnuala Earley, the group economist at Nationwide, said: “We don’t think the market is going to crash, but prices will be flat next year.

“We had been saying for some time that rises in 2008 would be around the level of earnings growth - about 3% - but we now think they will be weaker than that.

“As a result of slower economic growth and the impact of the credit crunch, we now think house-price inflation will be around 0% and there could be falls on an annual basis in some areas. We could then see a few years of flat growth.”

If she is right, it would be the first time that prices have fallen in the regions on an annual basis since 1998, when Yorkshire and Humberside slipped less than 1%.

New figures from Halifax, Britain’s biggest lender, revealed last week that prices in some areas are already falling.

The recent boom in Northern Ireland, which has pushed property a staggering 29% higher over the past 12 months, looks to be over with prices down by 3.2% over the past three months. Property in northern England is also down by an average of 2.1% over the last quarter.

On the flip side, the Greater London market remains stronger than the rest of the country, with prices up 2.3% over the past three months.

Capital Economics, a consultancy, is forecasting falls of 6% over the next two years. Kelvin Davidson, property economist, said: “The problem with the IMF data is that it doesn’t take momentum and mentality into account - that is what has really driven price increases recently and what holds the key looking forward.

“British consumers like to own their own homes, but if they lose confidence and regard property as an asset that is losing value, then falls of 3% or more next year are easily foreseeable. But equally, if confidence holds firm, we may not see any falls at all.”

In another worrying sign, returns on commercial property fell by 1.1% last month. It was the first fall since December 1992 and the biggest monthly fall since 1989, when the sector was in the early stages of a slump which lasted until 1991.

However, most economists insist a severe recession is unlikely without sharp interest-rate hikes or a big rise in unemployment, neither of which look on the cards. Earley said: “We had to have a hike in interest rates in the 1990s to get a crash and we are not in that situation now.” Nevertheless, some homeowners who were planning to sell are now expected to bring forward their plans while the market remains relatively buoyant.

Liam Bailey at Knight Frank, an estate agency, said: “Some people are definitely bringing things forward and selling now because they think the market will weaken. If you need to sell this may be worth doing, but if you don’t, you may decide to stay put.”

On the other hand, families who are under no pressure to move are putting their plans on hold, which will depress demand further.

Jo Freegard, 37, pictured with her two sons, James, three, and 16-month old Max, was planning to move next year, but is now waiting to see what happens to the market.

Jo and her husband Simon live near Guild-ford in Surrey. She said: “We were planning to put the house on the market in the new year, but given the current climate we’re beginning to think twice. We would like somewhere slightly larger, but we are fortunate that we don’t have to move.”

Many buy-to-let investors who would otherwise have sold now while the market is relatively buoyant are also expected to hold off until April, when the government will introduce a new, flat capital-gains tax rate of 18% on profits above the annual allowance - £9,200.

If a buy-to-let investor sold before April, they would pay tax of between 40% and 24% depending on how long they have held the property, so some investors could save tens of thousands of pounds by waiting.

Davidson said: “There is a danger we will get a big rush to sell next April, especially if we are already seeing a sharp slowdown.”

The silver lining, however, is that interest rates may now come down sooner than expected. Before the credit crunch, most economists believed that interest rates at 6% were on the horizon. Most now expect the next move to be downwards.

Earley thinks there is a 30% chance that Bank rate could be cut by 0.25 points to 5.5% next month, but says it is more likely the Bank of England will wait until early next year before reducing rates.

There is no guarantee that borrowers will receive the full benefit, however. Melanie Bien at Savills Private Finance, a broker, said: “Borrowers shouldn’t necessarily bank on cheaper mortgages next year. The recent financial crisis has been a sharp wake-up call to lenders and they are already becoming more cautious.

“If the Bank of England cuts interest rates, some lenders might use that opportunity to widen their margins and not pass the full rate reduction on to borrowers.”