The UK housing market will cool substantially into 2008, with an almost one in three chance of an annual fall in prices at some time over the next 12 months, according to a recent poll by Reuters that questioned 22 analysts at banks, investment firms and research organisations.

The expected 2.2% rise for next year is half that found in a similar survey taken in April, in results that indicate that the latest spurt in a decade-long housing boom could be fizzling out following five interest rate hikes.

However, analysts say house price inflation will average 9.3% this year, compared with 7% predicted in a poll taken in April. All of the 18 economists that answered the question said that British housing was overvalued, with a median 15% divergence from fair value, up from 12.5% in April. The range stretched from just 5% to 30%.