Gill Lamprell - head of south and west residential development at Knight Frank - peers into her crystal ball to see what 2009 has in store.

Although the general economic outlook for this year is perceived to be bleak, I believe we have seen the worst of the property price falls, with a 20 to 25 per cent drop from their peak in 2007.

As we saw in 2008, the economic forecast is becoming harder to predict, but assuming there are no further financial shocks, we don’t believe that prices will fall more than another 10 per cent in 2009.

One of the main problems is the lack of mortgages for first-time buyers, who now need at least a 20 per cent deposit in order to get a mortgage. In the South East, where the average price for a flat is still £171,221 (Land Registry figures), this is a lot of money. This of course, affects the rest of the market.

The Government has intervened with a number of measures, most recently, the HomeBuy Direct scheme, which will allow up to 18,000 first-time buyers to get a new home at sites across England via an equity loan part funded by the Government and the developer, helping first-time buyers as well as new homes developers who have struggled to sell.

However, 18,000 nationwide is not a lot of people and only households earning less than £60,000 are eligible, which is a little on the low side for the South East.

Naturally, there is a huge lack of confidence which is also affecting the property market, but for those in a position to buy, early 2009 is a good time to do so, particularly buying new.

Many developers are offering incredible incentives on stock that has been built in the peak of the market, yet this will not last as the number of new home starts is rapidly depleting.

In the second quarter of 2008, the number of new starts was over 40 per cent lower than during the same period in 2007, and the total number of completions for the year could be less than 100,000, well below the 240,000 homes the Government needs to meet its target of three million new homes by 2020.

The undersupply of housing could set the scene for new price growth once confidence returns. However, the shortage could actually lead to another cycle of over-inflated prices.

When it comes to recovery, Knight Frank’s forecast indicates that house prices will plateau during the latter part of 2009 before starting to climb again by 1.8 per cent in the South East the following year.

The region is traditionally economically stronger than the rest of the UK, with its proximity to London and strong growth areas such as Ashford. The latter is enjoying regeneration that includes the new high speed rail link between King’s Cross St Pancras, Ashford and the Kent coast from December 2009.

For information on current and future Knight Frank developments, contact Gill on 01483 564660 or visit www.knightfrank.com