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Property prices will fall 15 percent this year, another 10 percent in 2009 and will take up to two years to stabilise despite the prospect of several more interest rate cuts, a Reuters poll showed on Friday.

The poll of 38 analysts at banks, investment firms and consultancies had far more pessimistic conclusions than a similar survey taken just two months ago and underscores how decisively sentiment has turned against a once-soaring market.

While median forecasts showed average house prices will fall by about a quarter from peak to trough, several said that they would fall 30 percent or more and three analysts predicted they would crash 40 percent from their highs.

Forecasters have become much more bearish than they were in August, when the median predictions were for a 7 percent fall this year and 8 percent in 2009.

"Although the housing market correction is a necessary evil, the credit crunch is exacerbating the speed of the correction," said Peter Dixon, economist at Commerzbank.

"We are now beyond the stage of interest rate cuts bailing out the housing market -- we are in the midst of a wholesale rebalancing of the economy, and the housing market stands right at the heart of the problem."

The survey makes grim reading for anyone who bought a property in the past few years when UK banks were handing out mortgages at historically low rates with historically low restrictions on how much an individual could borrow.

A 25 percent fall would wipe about 50,000 pounds off the average property value, based on a peak average house price of just under 200,000 pounds struck in August 2007 using the Halifax index. But that follows a more than tripling in house prices over the preceding decade.

Property prices, which have already fallen 12.4 percent this year on the Nationwide's measure, will round off 2008 with a 15 percent loss and tumble another 10 percent in 2009, according to median forecasts in the survey.

Before the poll was conducted, the Bank of England slashed interest rates by a half point to 4.50 percent in a coordinated move with other central banks to help restore confidence amid the worst financial crisis in 80 years.

The BoE is expected to cut rates another 1.5 percentage points to 3.0 percent by June, according to the latest Reuters UK interest rate poll taken earlier this week, which would be the lowest rates since the 1950s.

Most analysts said that aggressive rate cuts would help cushion further falls in UK house prices. But they were nearly unanimous in saying that they remain overvalued, even after having fallen more than 10 percent over the past year.

"It may make them fall a little less quickly than if rates were kept on hold," said Andrew Brigden at Fathom Consulting.

"But aggressive cuts would not change the extent to which the UK housing market was overvalued, and hence would not change the extent to which UK house prices need to fall."

Forecasts for mortgage approvals, loans agreed but not yet made and a key forward-looking indicator for the housing market, backed up the view that property prices won't be rising again any time soon.

Economists saw approvals at 35,000 in six months and 50,000 in a year compared to 32,000 at the last reading, which is less than a third of the total at this time last year.

The forecasts for house prices collected in the poll were based on a variety of surveys, mainly the Halifax and Nationwide indexes but also the Department for Communities and Local Government DCLG.L.

Source:  http://uk.reuters.com/