Property prices appear to be overvalued and the buy-to-let market could be a source of weakness in the coming months, according to Gordon Brown’s housing market guru.

Kate Barker, a member of the Bank of England’s Monetary Policy Committee (MPC) and the author of two reports on the UK planning system, said that the level of house prices was on many estimates higher than market fundamentals would suggest. As a result, it was vulnerable to sudden changes in price expectations, making the future hard to forecast, she said in a speech in Southampton.

A decline in demand from wary buy-to-let investors, who make up 12 per cent of mortgage demand, could well dampen the market, she said, particularly if potential first-time buyers also chose to sit out any fall in prices.

A property slowdown was unlikely to affect consumer spending greatly but would probably cause a decline in construction, taking the edge off Britain’s strong growth rate.

But Ms Barker, seen as a crucial swing voter on a divided MPC, said she did not expect the turmoil in the financial markets to trigger weakness in the housing sector or business confidence, although she would be monitoring both measures closely in the months ahead. Her comments signalled that she is not ready to vote for a cut in interest rates, adding to the chances that rates will stay on hold until the end of the year.

Recent indicators have suggested that the housing market has started to soften, George Buckley, of Deutsche Bank, said: “We expect the slowdown to gather pace going forward.”