Such a drop would push property values back to their 2004 level, the Centre for Economics and Business Research (CEBR) warned. 

The think tank said property prices look set to fall by 25% from peak to trough, with the average home set to tumble from a high of just below £200,000 to a low of around £150,000 by the end of next year.

According to CEBR, the fall will come despite the Bank of England cutting its base rate by 1% before Christmas. It expects the base rate will be as low as 2% next autumn.

While the study paints a grim picture over the next few years, experts at the CEBR expect house prices will eventually rise from 2011, virtually wiping out recent falls.

It also predicts that the government's bank rescue package will "start to ease mortgage availability within the next few months".

The group expects prices to be broadly flat in 2010, before rising by around 20% during 2011 and 2012.

But even with this level of growth, the average home would still cost 3% less in 2012 than it did in 2007, well down on the group's previous forecast that prices would be 15%  higher by 2012 than they were last year.