Economist Richard Ramsey of the Ulster Bank predicted the fall based on the way average prices rose to £250,000 during last summer.
In the bank's latest quarterly report, Mr Ramsey said the anticipated drop will take prices back to the levels of autumn 2006.
"We believe that the current Northern Ireland average house price is closer to £200,000 and we are anticipating it to fall by a further 12.5% to reach £175,000 by the end of 2008," he said.
Meanwhile, last year's property boom looks to be well and truly over across the whole of the UK as a leading mortgage lender has reported that house prices have fallen by 1% during the past year.
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This marks the first year-on-year fall since 1996, according to the Nationwide building society, who said - in their report released today - that house prices have in fact fallen for the sixth consecutive month.
Fionnuala Earley, Nationwide's Chief Economist said: "April was another difficult month for the housing market. Falling levels of market activity meant that prices fell by 1.1% during the month and ended up 1% lower that this time last year.
"April's fall in prices continues the trend of the last six months and reflects the weakening sentiment in the market brought about by poor affordability and tighter financial market conditions."
The average cost of house in the UK is now £178,555, which is £1,759 lower than last year.
Ms Earley also added that the majority of borrowers were not taking out loans and most mortgage borrowers have either not been affected by recent market events of have directly benefited from cuts in the Bank Rate.
She said that borrowers who will be most affected by higher mortgage rates are those whose deals are set to expire.
"Overall, some groups of borrowers will certainly feel the effects of higher mortgage rates, but 85% of borrowers will be seeing no impact or will benefit directly from reductions in the Bank Rate this year," Ms Earley said.
(BMcC)
