HOUSE prices are set to fall 20% during the next three years, it is said.
Researchers Capital Economics say the fall will come as the booming property market corrects itself.
The group expects prices to rise 5% to 6% by the end of this year, then begin to fall at the start of 2005.
The group said it thought this gloomy scenario was now the most likely outcome for the market as property had become overvalued.
Capital Economics expects price falls to be worse in northern regions, where it says property looks most overvalued in comparison with earnings.
It is expecting falls of 25% to 27% in the North, North-West and Wales.
Prices are expected to fall about 20% in London and the South-East.
A Capital Economics spokesman said: "There is an awful lot of variation in opinion about whether and how much prices will fall, but our central forecast is that they will fall by 20%.
"The boom has run on for too long and prices are significantly above what is sustainable."
He added that he expected prices to fall regardless of what happened with interest rates and the wider economy.