Suddenly house prices are falling and the daily obsession is predicting how far down can they go. The evidence so far is that the softening will continue - with valuations falling by up to a tenth – but that the downturn will not turn into a rout.

The joker in the pack is the buy-to-let investor. Purchasing by buy-to-let investors has slowed because of the impact of the credit squeeze, but the consensus is that the market will not be overwhelmed by sales from cash-strapped owners desperate to quit the rental market.

Fionnuala Earley, the chief economist at Nationwide, is particularly optimistic. She predicts that cuts in interest rates and the sheer number of tenants will help to keep the buy-to-let investor in business.

“There will be those investors who want to crystallise gains, but those will be the speculators who are struggling to get tenants,” Ms Earley said. “We are in a market where there is great tenant demand because first-time buyers are unable to get on to the housing ladder.”

Ed Stansfield, a property economist at Capital Economics, does not expect a wave of buy-to-let sellers to flood the market. However, he believes that their “hibernation” will continue long into the year.

The growing importance of the buy-to-let investor market has been underlined by separate figures published last month. The Council of Mortgage Lenders revealed that during the past year the number of buy-to-let landlords had outstripped first-time buyers for the first time since records began. It is estimated that 340,000 loans and remortgages were granted to buy-to-let landlords in 2007.

Meanwhile, Halifax estimated that only 300,000 first-time buyers had entered the market last year, 44 per cent fewer than in 2002 and the lowest level since 1980. Would-be buyers were pushed aside by high prices and the tightening of lending criteria, which makes it harder for people to get mortgages.

Nationwide and Halifax both expect house prices to remain flat next year, but that view is not universal. Capital Economics forecasts a 5 per cent decline in 2008 and an 8 per cent fall in 2009. David Miles, chief economist at Morgan Stanley, expects house prices this year to suffer a 10 per cent fall, bringing them back to where they started 2007. Savills, the estate agency, predicts that turnover will be down by a fifth this year, Knight Frank forecasts a 12 per cent drop in volume while Hometrack expects a 16.5 per cent reduction in properties sold.

London is usually the first part of the housing market to slow and the first to pick up. Ms Earley says that the situation in the capital continues to be characterised by “chronic undersupply”, with the shortage of attractive stock giving support to underpressure valuations.

Peter Rollings, managing director of Marsh & Parsons, a 14-branch agency that covers Central and South West London, expects asking prices to come down to levels seen in the middle of last year. Mr Rollings said: “It’s gloom out there but not doom. People are waiting on the sidelines for a spot of bargain hunting. Families, however, can only put off moving for a certain amount of time. Spring might just come a little later this year.”

Prime Central London properties worth £2 million or more have started to show signs of life during the past two weeks, Mr Rollings said, with sealed bids still the norm for houses in Kensington and Chelsea worth at least £4 million.

For the majority of buyers and sellers who do not earn six-figure bonuses, there will a long winter waiting in hope for a cut in interest rates to materialise. Without it, London’s “standard market” of between £350,000 and £1.5 million will continue to struggle.