One in 10 chance of a Nineties' style property crash

They said the confidence of borrowers had been badly damaged and the chance of a sharp downturn, particularly in London, had increased.

Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors, said there was now a "one in 10 chance" of a crash on the scale of the negative equity disaster of 1990 to 1993.

He also said there was a one in five chance of a 10 per cent decline in London house prices over the next 12 months. At best, the London property market would flat-line over the next 12 to 15 months. His previous forecast had been a three per cent rise.

Douglas McWilliams, chief executive of forecasters CEBR, said house prices would fall 10 per cent. He said the "extraordinarily bad" images of savers queuing was bound to hit consumer confidence leading to a downturn in consumer spending. This will in turn result in a sharp fall in economic growth, feeding straight through to property

Nineties' style property crash

prices.One central London estate agency said it had seen a dramatic drop in the number of prospective buyers. David Salvi, director of Hurford Salvi Carr, said: "We do not believe it is a coincidence that our quietest weekend of the year occurred immediately after the Northern Rock share crisis.

"Our research of search engines has found that other estate agents and property portals have all experienced the same trend with web-based property traffic down between 25 to 40 per cent."

Peter Rollings, managing director of Marsh & Parsons said: "The market is taking a breather."

The buy-to-let market looks particularly vulnerable because lenders see it as riskier.

Howard Archer of forecasters Global Insight said: "If the Northern Rock debacle substantially undermines already dwindling confidence in the housing market, buy-to-let will be hit first - and hardest."

There are also signs that the credit crunch could hit funding for major property developments in London.

The firm behind the planned £1billion Shard of Glass tower near London Bridge said today the problems in the financial markets were hampering negotiations to secure backing.

But there was some better news for the property market when it emerged that the headline rate of inflation slipped from 1.9 per cent to 1.8 per cent last month. This makes it more likely that there will be a cut in the Bank of England base rate before the end of the year.

But some economists fear rising food prices could push up the rate of inflation again in coming months.