HOMEOWNERS have good reason to feel confused. Last week Halifax said house prices fell 0.5% in October, a week after Nationwide said they rose 1.1%.

Economists say it is not unusual to get conflicting data in the dying days of a property boom, and most agree the underlying picture is one of slowing growth.

Halifax said that the annual growth rate eased to 8.9% last month, the lowest this year, and expects it to drop further in the coming months.

The big question, then, is not if the market is slowing, but whether prices will fall across the country next year.

At this crucial time, we invited a panel of experts into The Sunday Times offices to discuss the outlook for the market. Here are their views.

Kathryn Cooper, Money editor: Nationwide’s figures were unexpectedly strong. Is the slowdown happening?

Fionnuala Earley, Nationwide: We were quite surprised to see growth of 1.1% in October, which took the annual rate from 9.3% to 9.7%, but I don’t think you should put too much emphasis on one month’s figure. The underlying data confirms that the market is slowing, and we think growth will be about 6.5% by the end of the year.

Simon Rubinsohn, Royal Institution of Chartered Surveyors: New-buyer inquiries have been declining for 10 months and our latest figures found that the number of surveyors reporting falls in house prices increased by 14.6% in September – the fastest decline for two years. The last survey was also quite interesting because it picked up some weakness in London, which hitherto has been a very strong area.

If you look at the number of sales compared with the stock on estate agents’ books, though, things look much more stable. Sales are falling but supply is falling at a faster rate and that is underpinning the market.

A slowdown is inevitable because higher interest rates will drag down year-on-year growth, but supply issues suggest one shouldn’t get overly bearish; price falls are unlikely.

Yolande Barnes, Savills: I would agree that weakness is coming through in central London, which is an inevitable consequence of the sort of shock we’ve had with Northern Rock and the global credit crunch. The central London market tends to spike down sharply in response to something like that.

It happened back in 1998 after the Russian debt crisis, after the first war with Iraq in 1990, and after September 11. It is because of the highly discretionary nature of the purchases that take place in prime central London. City analysts are marking down property across the board, and I think they are marking it down in their own portfolios.

We think the prime market could fall 3% before the end of the year, though we still think it will end next year up about 5%.

There is a real divide between the City bonus boys who buy prime properties and overseas investors who buy super-prime – that is properties worth more than £4m. That market is still pretty strong: our agents are doing a lot of deals at that end.

Liam Bailey, Knight Frank: I think all the markets will slow in terms of house growth, but I think deal volumes are where we will really see things change. Three or four months ago people wanted to buy no matter what. The situation now is completely different – people are looking for a reason not to buy.

If there is the slightest problem with a property, people will walk away. The only exception is with very desirable properties, which are still selling well and seeing competitive bidding. Properties spoiled in any way, by say road noise, are very hard to sell.

Sellers don’t want to take a hit, so unless they have to move they will just take their property off the market if they can’t get the price they want. This is what we saw in 2004-5 when the market was last weak. Prices are flattening because purchasers think the ball is in their court, but vendors aren’t willing to take a hit. You reach a stand-off, and we think we’ll see more of that.

Cooper: So will it be a buyer’s or seller’s market?

Bailey: The power is now with the purchaser but only to the extent that the vendor wants, or has, to sell. What’s been happening in London for the past two years has just been odd – it’s not normal to put your house on the market and sell within a week. But it takes time to adjust: people will have to get their heads round the fact that you have to work quite hard at getting a deal.

Cooper: What does all this mean for next year?

Earley: In 2004, activity really slowed down, but then things picked up when the Bank of England cut interest rates in August 2005. We’re in a different position now. Affordability is worse than it was then, so I don’t expect prices to rebound even if interest rates are cut next year. We’re forecasting growth to be broadly flat next year and then reach an equilibrium level where they grow in line with earnings at around 3% to 3.5% a year.

Rubinsohn: If we do get a slowdown in house-price growth and then we see an interest-rate cut or two, it could provide the impetus for an upturn.

Kelvin Davidson, Capital Economics: The recent interest-rate rises are still filtering through so we think sales and turnover will still be weak in 2008 and expect prices to fall by an average of 3%. We’re not talking all-out disaster though – the difference between zero and minus 3% is not a lot. In the context of gains of 60% over the last five years, are people really going to panic if prices drop slightly? We don’t believe so.

If you look back to 2004-5, transactions plummeted but prices didn’t fall. This time things are different because affordability is more of an issue and there are question marks over the impact the credit crunch will have on the sub-prime market.

We are already seeing some lenders tightening their criteria and if people find they are unable to get a mortgage, it could be the straw that breaks the camel’s back. The forces are building for something worse than zero growth.

Bailey: I just can’t see how house prices can fall significantly. We all know housing in this country is expensive, but without a significant catalyst, what is there to move us from where we are now? It took a recession for prices to fall in the 1990s.

In 2004 all the things were there to suggest we would see a significant downturn, but it didn’t happen because people remained positive about the long-term outlook for property. The problem in the UK is that we have a severe shortage of supply and as long as that remains, house prices will be well underpinned.

Rubinsohn:I agree. I think the risks are skewed to the upside and that house prices could be higher this time next year.

Barnes: If you monitor house-price changes at a local level, the slowdown has already begun. We think prices nationally will rise by 3% next year, but the Midlands and the north will see increases of only 0.5% and they could see falls in the first half of the year.

Earley: Our latest regional figures showed prices fell slightly in Wales between June and September, and barely moved in the Midlands and north. I think that will continue next year.

Some areas are more vulnerable than others. Northern Ireland, for example, could be at risk of falls because it has risen so strongly recently and I think a lot of that has been overexuberance. The north has also done badly this year. It’s been up and down and that volatility could continue.

Cooper: Isn’t the great unknown the credit crunch? What if lenders rein back in a big way, and people can’t borrow?

Ray Boulger, John Charcol: Relatively few lenders have openly tightened their criteria. A few have pulled out of the 100% market, and Norwich & Peterbor-ough will now only lend up to 90% of the property’s value.

The other main changes have been in the new-build flat market, where lenders want bigger deposits. People with very poor credit histories may find they are unable to remortgage when they come to the end of their current deal. Their only option will be to go to the lender’s standard variable rate, which among sub-prime lenders is now often above 10%.

Many of these borrowers won’t be able to afford repayments at this level, leaving them at risk of repossession.

Cooper: Where are interest rates going?

Davidson:Any chance of another rate rise this year has gone now. We are forecasting Bank rate at 5% by the end of 2008, but I think the risks remain on the upside. The Bank can’t risk inflaming inflationary pressures.

Boulger: Our forecast is for Bank rate to be 5.25% at the end of next year, but I think it could go lower. The full impact of the US mortgage crisis has not yet been seen and I think there is still bad news to come out. If the credit crunch continues beyond the middle of next year, interest rates could fall below 5.25%.

Cooper: So should homeowners and investors prepare for several years of low growth?

Barnes:That’s the big question. Will we continue to see periods of hills and troughs or will that be replaced by lower, steady rates of growth? We think house-price inflation will average 4.2% per annum over the next five years.

Growth will be held back by affordability factors and I think households will want to take the opportunity to rebuild their “comfort cushion” as many have very little surplus income left each month after housing costs.

However, there is a big potential derailer to this scenario and that is supply. If we fail to resupply the market, prices may rise sharply again. We are still looking down the barrel of a gun because of the mismatch between supply and demand.