Right, lets get this into perspective. The cost of new homes are really what drives the prices up and down. A builder isn't going to build a house and sell it for less than it cost to build. The target of 240,000 new houses in UK in the next year has not even reached a third of that (about 70,000) as builders are stopping building. The ones they are selling now, at a knock down price, are merely being used to pay off loans to the banks which they took out to build these houses in the first place. Working on a profit margin of about 25%, and the fact that house prices are reported to have fallen 25% in the last year, will mean that builders are now effectively working for nothing. Now, the demand for new houses will pick up as they aren't being built. Banks will have to start granting mortgages again (after all, banks are in business to lend money and get more back than they lent out) so the laws of supply and demand are bound to kick in again. I reckon this should start happening fairly soon, about Spring of 2009 and we will see prices going back up. Once that happens, people will start buying again as they will realise that houses will not go down any more and will want to buy before they go up too high (human nature, after all). By Summer of 2009, prices will be around what they were early on this year and builders will start building again to gain that 25% profit.
As for the euro, yes it is at an all time low. Unless our government does something really stupid (and don't put it past them) like announcing we are joining the euro therefore losing all confidence in the pound, then it will be realised that Europe is in a bad a state as we are and the pound will start rising. The argument often trotted out for a weak pound is that it is good for exports. Britain is no longer a super exporting power and our invisible earnings (banking, insurance etc) have been worth more than tangible exports for some time and we have been a gross importer for many years so the low pound simply puts prices up. Germany, on the other hand, is one of the larges exporting nations in the world so a strong euro is bad for them. If the pound keeps weakening, the price of our fuel goes up (priced in dollars) so something will have to be done. I reckon you may see the pound falling even further this year but will rally in the New Year when people realise the parlous state of the big European countries. I expect the pound to be around the 1.30 mark again by Spring and possible up to as high as 1.50 by Summer.
Now, if all the above comes true, apart from remembering you heard it first here, I'm going to make sure I enter every raffle and lottery that I possibly can.