Shares in Britain's biggest housebuilding companies fell sharply again yesterday, after a leading investment bank predicted the UK property market would be hit by a three-year slump.

Shares in Britain's biggest housebuilding companies fell sharply again yesterday, after a leading investment bank predicted the UK property market would be hit by a three-year slump.

Goldman Sachs warned that house prices could drop by 6% this year and 8% in 2009 as sales volumes collapse.

"The UK housing market is only at the start of a deep downturn, which could last up to three years, in our view," Goldman analysts said.

The downbeat assessment came only a few days after Lehman Brothers, a Wall Street investment house, forecast that British property prices could fall by as much as 28% in coming months.

Last week, the sector was rocked by downgrades from City analysts and worries over the health of Barratt Developments. Shares dived for three sessions in a row before recovering at the end of the week.

There was more grim news earlier this week when credit rating agency Fitch downgraded Taylor Wimpey's debt to junk status, sparking concerns about the health of some of the weaker builders. Shares in Land Securities plunged after Credit Suisse cut its rating on the real estate company to "neutral" from "outperform" and lowered its price target to 1529p from 1934p.

The Goldman comments sparked another sell-off in the beleaguered sector yesterday with Persimmon losing 8% in the FTSE-100 index. Building supplies group Wolseley fell back too, shedding 5%. The Footsie ended the day 105 points down at 5756.9.

On the FTSE-250 mid-cap index, Taylor Wimpey's shares tumbled about 8%. Redrow and Barratt Developments were 17.5% and 11% lower, while Bellway lost 10%.