A slump in mortgage approvals in November provides yet more evidence that most of the housing market will be in the doldrums next year. Prices — which have risen by an average of 179 per cent over the last decade — will stand still or even fall in some areas as already financially constrained households grow more cautious and opt to stay put rather move up the housing ladder.

Figures released yesterday by the British Bankers Association (BBA) show that the number of loans approved by banks in November was 57,432, that is 43 per cent lower than a year ago. The figure highlights not only waning confidence among buyers, but also the new niggardly stance of lenders who are reacting to the credit crunch with a new mean streak that will continue to affect the mood of the market in 2008.

Most housing sector commentators, including Halifax, Nationwide and The Royal Institution of Chartered Surveyors (RICS) are predicting zero growth in 2008, although Capital Economics expects a decline of 5 per cent.

However, as Halifax will reveal tomorrow, some areas will buck the slowing trend in 2008. Martin Ellis, the bank’s chief economist, believes that relatively inexpensive locations with improving commuting links will be among the winners.

Over the past 12 months good transport has been one of the key determining factors in the fortunes of any location as we outline below in our survey of how the UK’s different regions fared in 2007 and the prospects for the year ahead.

Another strong influence on the performance of any location was the number of new-build flats; a glut of city-centre apartments cast a blight on such cities as Nottingham and Leeds. The British remained unswerving in their conviction that a family home is a house not a flat — a view unlikely to be changed in 2008.

As this year dawned, it was forecast that prices would start to slow almost immediately. But the average UK price did not weaken until September, just one of the surprises of 2007 when housebuyers learnt that America’s sub-prime scandal would be our problem too and when the largest rises were in central London, Northern Ireland and the Sloaney playgrounds of the South West. However, it’s not all doom and gloom in 2008.

South East

The desire for an easy commute to a well-paid job in London was the main driver behind prices in the South East in 2007. Among the beneficiaries were: Weybridge — on a direct line to Waterloo — Winchester, Slough, unlovely but close to the M4 and Farnham, fab if you could not afford nearby Guildford.

During the first half of the year prices surged, driven by a scarcity of supply, particularly of family houses. Competition among buyers for such properties could push up prices by as much as 10 per cent in Weybridge, Halifax’s most expensive town in the South East with an average price of £543,064.

Winchester, Farnham and Slough recorded rises of 35 per cent, 30 per cent and 36 per cent respectively. However, it would be wrong to assume that every inch of the South East was desirable. Leatherhead was one of the South East’s laggards, the performance of its market held back by a glut of new developments, a common trend.

In the final months of the year, as the credit crunch started to bite, the pace of growth slowed. The Royal Institution of Chartered Surveyors’ (RICS) monthly survey indicated that confidence was slipping, reflected in the fall in new buyer enquiries. John Young of Humberts summed up the mood: “If you were priced at £325,000 in the summer you will probably sell now for £295,000 and a home priced at £600,000 will now probably go for £550,000.”

Savills expects the South East market to grow by 4.5 per cent in 2008, but other forecasters are more gloomy, particularly about towns with a glut of new-build apartments. However, a shortage of properties should continue to provide support in areas with good transport links.

The preference of most homeowners is likely to be to stay put. Ross Attwood of John D Wood & Co, in Weybridge said: “Owners of a £550,000 three bedroom house or a £400,000 two bedroom cottage are likely to stay put,” he said.

London

The London market became increasingly detached from conditions elsewhere, with property prices driven upwards by City money and international wealth.

The action — gazumping, sealed bids, houses sold within hours of going on the market — was hottest in prime central London locations such as Kensington, Chelsea, Belgravia, Holland Park or Notting Hill. In June Primelocation.com reported that asking prices in Mayfair were 57 per cent higher than the year before.

The price boom spread into the southwestern suburbs of Fulham, Barnes, Wimbledon and even Merton. In the north, the Hampstead halo spread, boosting the arc to Camden.

But not all London was equal. By mid-year, there were concerns that increases in areas tipped to benefit from the 2012 Olympics had outstripped the regeneration process that justified them. When the Greater London annual growth rate was at 15.7 per cent, the boroughs of Bexley, Newham and Barking were reporting rises of less than 10 per cent.

The credit crunch hit London hardest: according to Hamptons, 60 per cent of the sales in London in September fell through. By October, prices were sliding faster here than anywhere else, although the prime market continued almost unaffected.

Most observers are predicting that the current turbulence will continue through the first quarter. But by mid-year they expect the general health of the economy and increases in the number of residents will bolster demand and support prices.

Knight Frank expects growth of 3 per cent across Greater London, while Savills predicts 5 per cent. Both tip blue-chip parts of central and southwest London to hold value best. Hamptons — which is tipping Bayswater, Islington, Kings Cross and Paddington as next year’s outperformers — thinks that prime Central and North London will grow 4 per cent and South London by 3 per cent.

South West

Moneyed Londoners seeking second homes pushed up prices in the South West. Lucian Cook described second homes hot spots, such as Salcombe in Devon, as having taken on “the characteristics of prime central London, namely, significant wealth chasing limited stock”. One individual paid in excess of the £4.95 million asking price for a five-bedroom house in Rock, the Cornish public school summer playground.

In Halifax’s October survey, prices in Truro, the most expensive town in the region (average £322,834) and St Austell, (average £224,943) were up by 34 per cent and 27 per cent respectively. Truro has good schools and St Austell has the Eden Project. By contrast, prices in Paignton in Devon, rose just 2 per cent in the year; the resort is simply not popular enough with the inhabitants of Fulham.

However, turmoil in the financial markets and the expectation of lower City bonuses, resulted in a slowdown towards the end of the year.

The focus in 2008 is expected to be less rich Londoners than poorly-paid locals who have been unable to get on to the housing ladder. Lower prices and another reduction in interest rates could help this group.

Savills forecasts that prices in the South West will rise overall by just 3 per cent in 2008; Hometrack is forecasting small decreases. All this means that families who are downsizing for a different pace of life beside the sea may be able to find bargains, if they have already sold up and are not in a chain.

Midlands

The Midlands was the first region to be affected by the change in sentiment; prices rose by just 4.7 per cent. Gloom set in early in the West Midlands, although there were some hot spots such as Leamington, up 20 per cent (average house price £230,909, Stratford upon Avon (average £315,789) and Stourbridge (average price £253,349), both up 27 per cent. The fastest rising town in the East Midlands was Stamford up 18 per cent to £257,178. By contrast prices fell in Alfreton, a former mining town, down 3 per cent at £129,303.

Buyers in the Midlands were split between those looking for value-for-money country houses in areas such as Rutland and Melton and city commuters buying in suburban areas with good transport links. The state of the centre of cities, like Nottingham however, was less healthy.

Peter Mills from Humberts estate agents says: “In recent years Nottingham has been taken over by loft-style apartments. That sector is now struggling with surplus supply and there are no new investors as the buy-to-let market is no longer attractive.”

Forecasts for next year are not encouraging. Nationwide is predicting prices will be flat, while Halifax forecast a 1 per cent fall in prices.

East Anglia

It was a year of two halves for the property market in East Anglia. After a strong start the market never came out of the summer recess. Now agents are bracing themselves for a difficult year to come. John Pocock of Pocock & Co in Cambridge suspects that prices could fall by about 4 per cent.

Halifax figures show house-price inflation for 2007 in East Anglia at 11.1 per cent. Nationwide’s figures show slower, but still healthy, growth of 6.9 per cent. The Halifax data also highlights property hot spots in the region: ten towns have had double-digit price growth over the past 12 months, with St Neots in Cambridgeshire having a price rise of 25 per cent, and Stowmarket in Suffolk 24 per cent.

However, there is concern that the City bonus squeeze is likely to weaken the outlook in second-home hot spots such as Cley Next the Sea and Burnham Market in Norfolk, and Walberswick in Suffolk.

Halifax and Nationwide predict that prices will stall next year in the area. But the continued shortage of housing, net immigration and interest-rate cuts, should be sufficient to prevent a slump.

The North

The North-South divide returned in 2007. Halifax figures show prices in the North falling by 2.1 per cent in the third quarter of the year. The average asking price in the North was £158,636 — 68 per cent less than average in the South, £265,921.

One major reason for this disparity was affordability. Average salaries across the North rarely top £25,000 — and this figure masks millions on the minimum wage in retail and service industries.

But as Steve Carr, the head of policy for English Partnerships, the Government’s national regeneration agency. “It is no longer enough to think of the North as just one place.” The centres of cities such as Liverpool, Middlesbrough, Leeds and Oldham are oversupplied with new build apartments, rejected by families and buy-to-let investors.

However, towns such as Ilkley, Harrogate (for new buyers) and Altrincham, the latest upwardly mobile town in irrepressible Cheshire, have prospered.

The forecast is certainly for rough times in many northern areas. Halifax and Nationwide predict prices will be weakest here falling by 2 per cent on average. However, many experts predict that there will be bargains to be had in cities such as Manchester.

Wales

The market in Wales, initially very busy, began to slow in June, with the number of transactions falling and prices softening. But there were double-digit price rises in some towns in the south, such as Caerphilly, up 19 per cent to £165,465 and Cwmbran, up 21percent to £151,543.

Peter Reilly from Savills in Cardiff confirms that property in South Wales, particularly in the rural areas, has seen a burst of interest this year. “These are from lifestyle buyers — looking for second homes and country retreats.” North Wales saw far fewer buyers than normal from Manchester and other cities in the North West of England.

Halifax forecasts no growth in house prices for next year with the Nationwide looking at a fall of 1percent in 2008.

Northern Ireland

Northern Ireland which had previously underperformed the rest of the UK property market, rivalled the growth of prime central London in 2007. In October, annual growth was running at close to 30 per cent, driven in part by bargain hunter from the Republic.

This masked rises of 62 per cent in Newtownards (average price £248,650) and 58 per cent in Carrickfergus (£207,435). Thriving Belfast (average price £22,783) was up 42 per cent in a year, with a house in Alliance Avenue, a no-go zone during the Troubles) hitting the news for its £800,000 price tag.

Observers are warning that such growth cannot continue, with Nationwide suggesting that Northern Ireland will underperform all other regions in 2008. There was a marked shift in mood in recent months, shown in the University of Ulster Quarterly House Price Index and other statistics.

Nationwide forecasts a decline of 5 per cent next year, but Halifax says that it expects prices to remain steady. Hometrack, the property data company, is more upbeat, expecting that it will grow by 2.3 per cent, just below the national average, which is a much stronger performance than that expected for the North, Midlands and Wales.

Scotland

This year was the year that the extraordinary boom in property prices came to an end, everywhere except Scotland. Scottish house prices have risen by 10 per cent this year. Everyone predicts further growth for Scotland next year, outperforming the rest of the UK — HBOS expects a 4 per cent rise, Hometrack predicts 3 per cent growth and Knight Frank forecasts above-average price rises of 5 pe rcent.

Inverurie, Aberdeenshire, was the best performing town in Scotland this year, with price growth of 35 per cent in 12 months. The Edinburgh property market grew by 18 per cent in 2007. John Colman, of Knight Frank’s Edinburgh office, says: “Scotland’s no different from anywhere else in the country now in terms of prices. Top end country houses have flourished — there aren’t very many of them and that makes them expensive. Commuter areas are very strong — Perthshire, Ayrshire, South Argyle, Fife, the Lothians and the Borders.”

Glasgow is another success story — not only have prices here also risen 18 per cent, but the city has won the bid to host the Commonwealth Games in 2014, which will bring investment to the run-down east end.

Faisal Choudhry, of Savills in Glasgow, says: “Tenement flats for under £100,000 get snapped up very quickly. That sort of price is hard to find in Edinburgh, but anything at the bottom there sells immediately, too. And the top end of the market is still performing stronger than ever. It’s booming.”

But he is also concerned about large new build flats in “unestablished parts of city centres”. He says: “The problem is that developers paid a high price for the land in the hope that they could charge high prices too and get their revenue back, but people in Glasgow don’t really have that kind of money.”