House prices are set for their first decline since 2011, according to a new survey.
The Centre for Economics and Business Research (CEBR) said the fear of impending rate rises and tightening of mortgage affordability tests have dampened price growth expectations for 2015.
It has forecast that average growth this year of 7.8% would be followed by a contraction of 0.8% next year.
"Tougher mortgage eligibility criteria, high deposits requirements and concerns about the future rate rises are starting to take steam out of the UK housing market," the CEBR said.
But the independent research body described the drop as a rebalance rather than a bubble bursting.
Prices in the London and the South East have seen double digit growth in the last year, far outstripping some other regions.
"Price falls next year will be modest and we shouldn't be too worried about this - we are not anticipating a crash," CEBR head of macro-economics Scott Corfe said.
"The market is adjusting after getting ahead of itself in the first half of 2014."
The Mortgage Market Review (MMR), brought in at the end of April, has increased lenders' scrutiny of prospective mortgagees, making them account for a wide range of outgoing monthly costs.
Would-be borrowers have been quizzed on how much they spend each month on items such as toiletries, gym fees and hobbies, to stress test their outgoings ahead of an increase in the historic base rate low of 0.5%.
"Affordability has become such an issue on the more expensive regions of the UK that buyers are starting to balk at high prices," the CEBR said.
In addition to the MMR pressure, there is increasing belief the Bank of England will raise the base rate before the end of 2014.
But governor Mark Carney has tried to soothe the market by saying there would not be a sharp ramp up in rates to pre-crash days.
In a separate study, the Intermediary Mortgage Lenders Association said less than half of surveyed lenders and brokers believed there was an improvement in lending conditions in the last three months.
The equivalent survey at the beginning of the year found that nearly all brokers and lenders believed the housing market was improving.
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