Heritable Banks chief executive, Mark Sismey-Durrant, has warned of tough times ahead for those involved in property development finance.

Sismey-Durrant said that up until now property had been a one-way bet but the mortgage finance bonanza has now come to an end.

He said people should remember that property is all about boom or bust: "We have seen significant changes to the financial services landscape with the sub-prime market collapsing in the US and redundancies in some of the world’s largest banks. There are also the unintended consequences of Northern Rock.”

He pointed out the three main areas of risk in property development finance - cost, time and market conditions and said that developers were selling on properties in a very different market from that in which they bought them.

"There will be a reduction in the price that developers get for their end product and funding will be more difficult. Lending criteria will be tightened and debt will be more expensive”, he said.

Sismey-Durrant predicted that difficulties in the property development market would be mainly in city centre flats, some of which have been subject to fraud, high-value London properties, and secondary and tertiary properties.

“Planning will remain extremely difficult - it will be more difficult for developers to make money and more difficult for poor developers to stay in business as we go through testing times. The market will flat-line but there will not be a crash. The Government says it will build three million new homes by 2020 and increase the amount of affordable housing available. But Gordon Brown’s numbers are pie in the sky”, he said.

On predictions for the housing market, Capital Economics had predicted a downturn of 3% next year and again in 2009. The Council of Mortgage Lenders (CML) was more optimistic predicting prices would rise by 1%. Estate agents Knight Frank and King Sturge predicted rises of 3% and 7% respectively while Bovis expected the prices of new homes to fall by 3%.