UK house prices will fall 2% next year after nine years of gains, the Halifax has said. But falls will be only temporary, the Halifax said. It predicts "modest" rises in subsequent years as interest rates ease and affordability improves.
The UK's biggest mortgage lender said prices dropped 0.4% in November, their second straight monthly fall.
Halifax said house prices had risen 16.8% over the year, down from last month's figure of 18.5%.
 |  The Bank of England's interest rate rises are successfully curbing housing demand  |
The drop in November left the average UK house price at �159,947, the Halifax said. Last month, the bank said house prices fell 1.1% in October, their biggest monthly decline in four years.
There will be regional variations, however, it added.
Homeowners in Scotland and Northern Ireland could see rises of up to 3% in 2005, while the most significant price falls of between 4% and 5% will be in the South East, London and the South West.
Slowdown
Halifax forecasts interest rates would decline by 0.5% over the next 12 months to 4.25%, encouraging buyers back into the market.
"Affordability will also improve, especially for first-time buyers, who will return to the market in larger numbers than in recent years," it said.
Prices would then start rising again beyond 2005, the bank suggested.
"The slowdown in house price growth and activity during the past few months shows that the Bank of England's interest rate rises are successfully curbing housing demand," said Halifax chief economist Martin Ellis.
But he added: "The fundamentals underpinning the housing market remain sound.
"In particular, the ongoing strength of the labour market, reflected in rising employment levels, will continue to support housing demand."
Mixed views
On Monday, data from the Bank of England showed just 83,000 mortgages were approved in October - the lowest level since January 2000.
Nationwide said this week it expected prices to grow by 2% in 2005 as rate rises and more realistic expectations about the market begin to bite.
The building society said house prices rose 1% in November - following a 0.4% dip experienced in October.
A trading update from Northern Rock appeared to back up Nationwide's predictions for the year ahead.
Barclays, meanwhile, has predicted that prices will sink 20% over the coming three years after recent booming growth - with prices set to drop 8% alone in 2005.
And property website Rightmove says its expects sellers to face a couple of "painful months" as the market tries to level out once again.
Elsewhere, analysts at Goldman Sachs have suggested prices will dip between 10 and 15% over the next 18 months, while as far back as a year ago Capital Economics forecast a 20% "peak-to-trough" drop.
"Although we remain relatively confident that a housing market slump will be avoided due to high employment, a low peak in interest rates, and a still reasonably healthy economy, we fully acknowledge that this is far from certain," said Howard Archer, economist at Global Insight.
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