The property market should brace itself for some slight drops in 2008 and 2009 as long as the Bank of England continues to monitor interest rates, says a new report from Savills.

The agent believes that the slow market currently is more due to credit constraints rather than affordability issues, and therefore if banks get their confidence back the market should soon speed up again. The central forecast now stands at a -4% fall in mainstream market values in 2008 and a further -2% fall in 2009 (as long as the credit crisis remains restricted to the financial sector).

Homeowners are reliant on the Bank of England to make sure further funds are available for buyers to get mortgages to ensure the market does not decline further, says the report.

All areas apart from super prime property will be affected by the slowdown, Savills claims, although a quick recovery is also anticipated, with surplus household income recovering well. A full recovery is forecast by 2012 at the very latest, with the larger the falls, the faster the recovery.

Yolande Barnes, Director, Savills Research, comments: ‘Our current forecast of -6% to the end of 2009 can only be achieved if we see decisive action from the Bank of England to ensure normality returns to the mortgage market. A failure on their part could have very serious consequences for the national housing market and economy in general.’