Blanchard Consultancy – the independent construction consultant

Homeowners will have to wait a decade before property prices return to 2007 levels, a leading estate agent said yesterday.

Average house prices are tumbling at a rate of £78 a day and are set to fall in total by 16 per cent this year and 11 per cent by the end of 2009, according to a forecast from Savills. This will bring the average value down from £182,080 in December 2007 to £136,123.

The London-based agent does not expect the market to show signs of recovery for another two years, with a full rebound to 2007 levels not likely until at least 2018.

It cautioned that only buyers with adequate cash will be able to take advantage of cheaper prices in the meantime, because of the lack of availability of mortgage deals.

Read more at Times online

Labels: Housing market, property prices, UK recession, uk repossesions

Land Securities, the UK’s largest property company, has reported a pre-tax loss of £1.74bn as the deepening decline in the property market forced the group to cut the value of its assets.

The company, which made a profit of £365.2m in the same six months last year, suffered writedowns of £1.74bn amid an “unprecedented period of financial instability”.

The plan to demerge Land Securities will be stopped because of the economic conditions, the group said, although it is still working on the sale of outsourcing arm Trillium.

Halting the demerger plan was widely expected among analysts because of the downturn and the departure of chairman Paul Myners to become the Government’s city minister. Land
Securities announced today that Mr Myners will be replaced by Alison Carnwath, the present chairman of MF Global.

Read more at Telegraph online

Labels: House market, Land Securities, property prices

The balance of surveyors reporting demand for commercial property in Q3 has fallen at the fastest pace in a decade, says RICS’ Commercial Property Survey published today (3 November 2008).

52% more Chartered Surveyors reported a fall than a rise in demand compared to 50% in Q2 2008.

All sectors remain firmly in negative territory for the fourth consecutive quarter with the industrial and office sectors dropping to the lowest balance in the survey’s history.

The worst hit area continues to be the retail sector with 59% more Chartered Surveyors reporting a fall than a rise in retail demand, a slight improvement from 63% in Q1.

The continuing financial turmoil and a slowing housing market is clearly weighing upon both retailer and consumer confidence.

The net balance of surveyors reporting new occupier enquiries in Q3 declined at the fastest pace in the survey’s history.

Read more at the RICS newsroom

Labels: commercial mortgages, credit crunch, property prices, RICS

Across the UK, houses are selling at an average of nine percent below the asking price with sellers in some regions being forced to accept as much as 12.5 percent discount off their advertised price, says RICS research published today.

As economic fundamentals continue to worsen, the gap between selling and asking prices is widening. In the North vendors are accepting the lowest offers – averaging 12.5 percent below the marketed price.

Vendors in the North West, East Midlands, West Midlands and Wales are accepting offers averaging approximately 10 percent below but in London the figure stands at 8.5 percent.

London has remained firmer than most as its diverse economy and large job market offers sellers more room for optimism.

Read the full article at the RICS newsroom

Labels: House market, property prices, RICS

The number of houses sold in Britain last month fell to its lowest since 1959 as the government's delayed announcement on changes to stamp duty deterred first-time buyers. HM Revenue & Customs said 62,000 houses were sold in August, less than half the figure for a year ago.

The news came as the British Banker's Association revealed mortgage approvals dived 64% in the year to August.

David Dooks, BBA statistics director, said: "The low number of mortgage approvals in previous months predicted lower gross lending in August and, together with remortgaging, a much weaker net lending figure than of late resulted.

"Falling property prices, economic pressures on households, tighter lending criteria and anticipation of the government's announcement on stamp duty all suppressed or delayed demand in August and will continue having an impact."

Mortgage approvals for house purchases tumbled to 21,086 - the lowest since the series started in 1997 and down from 58,564 in August 2007, when mortgage lending had started to slow.

Article continues at Guardian Property

Labels: House market, property prices, uk mortgage market

Banks are taking a tougher line with commercial property investors and could foreclose on underperforming loans in the sector in the next few months, according to research from Drivers Jonas, the surveying firm.

Property investors that are unable to bring new equity into their investments, to bring loan-to-value ratios back into line, may find themselves in difficulties, the research suggests.

"There seems an inevitability that situations which are deemed to be "underwater" for the long-term could end up with lenders foreclosing," Drivers Jonas says in its summer investment trends report.

"It remains the case that, if possible, banks are using LTV (loan-to-value) breaches to renegotiate loan terms but they will not hesitate to act if they feel that the loan is under threat," the report continues.

It says that banks will become more vocal in the next few months as the risk of tenants failing to pay their rents rises, along with the continuing pressure of capital write-downs across the banking sector.

Read more at Times Online

Labels: commercial mortgages, property prices, UK Interest rates

The Bank of England governor, Mervyn King, yesterday warned the government not to try to artificially support the mortgage market as that could further prolong the year-long credit crunch. He also held out little immediate prospect of interest rate cuts to boost the flagging economy.

Appearing before parliament's cross-party Treasury committee, King said the Bank did not have the resources to underpin lending across the entire financial system and thereby boost mortgage lending.

The Treasury has commissioned Sir James Crosby to report on steps that could be taken to encourage more mortgage lending which could help prevent house prices from tumbling further.

King said there were only two choices for the government - either to let the Bank's special liquidity scheme (SLS) help the financial system gradually return to health, or to fund the mortgage market through a state-run bank.

Article continues at Guardian Online.

Labels: Bank of England, Mervyn King, Mortgage rates, property prices, uk housing

Mortgage rates have fallen back to the level they were before the credit crisis sent the price of home loans soaring last year.

The average interest rate on a two-year fixed-rate mortgage - the most popular deal taken out by home owners - has dropped from a peak of 7.08 per cent at the beginning of July to 6.39 per cent, according to Moneyfacts.co.uk, the financial website.

Two-year rates have not been this low since July 2007, before Northern Rock was forced to borrow £26 billion from the Bank of England and the phrase "credit crunch" entered everyday use.

The figures confirm that while the economy and the housing market continue to slide downwards, the worst seems to be over in the mortgage market.

It follows two months of steady rate-cutting from the UK's leading banks.

Read more at Telegraph Online

Labels: Bank of England, credit crunch, Mortgage lending, Mortgage rates, property prices, uk housing, uk mortgage market

A UK recession could leave up to 1.3 million households in negative equity, analysts predicted yesterday. House prices will fall by 25-35 per cent from peak to trough, compared with just 12 per cent from 1990 to 1995, the Bernstein analysts said. In the "recession case" of a 35 per cent drop, 1.3 million households, or nearly 20 per cent of mortgages, would be in negative equity and banks would lose £38bn over several years, they added.

A slowdown that sees growth of 0.5 per cent next year would result in 400,000 households suffering negative equity. The effect of the far bigger than expected fall in house prices would be offset by lower loan-to-value ratios, less activity near the peak of the market, and higher repayment rates than in the last crash.

On Thursday, Halifax's parent HBOS reported property prices down 12.7 per cent in August from a year earlier. Bernstein said the UK housing market now had strong downward momentum, with mortgage approvals collapsing, estate agents unable to shift stock and industry sentiment gloomy. "With house prices down 12 per cent so far this year on the HBOS index, and significant further falls expected, the fear of negative equity is again stalking the land," the analysts wrote.

Read the full article at The Independent Online

Labels: global recession, Halifax, Housing market, HSBOS, property analysis, property prices, uk housing

Shares in housebuilders rose this morning ahead of the launch of a £1bn government plan to help homeowners. Gordon Brown is expected to unveil a package of measures today to revive the ailing housing market targeted at first-time buyers and vulnerable families.

Shares in Taylor Wimpey jumped 7.6%, up 4.25p at 60.25p in early trading. Barratt was up 5.5%, or 8.5p, at 164.5p while Persimmon climbed 3.9%, or 15p to 400.25p. Bovis Homes advanced 3.4%, or 15.5p, to 466.25p and Wolseley rose 7.5p to 468p, an increase of 1.6%, making it the second-biggest riser on the FTSE 100.

However, the FTSE 100 index was down 20.2 points at 5582.7 points, a fall of 0.36%. Energy groups and miners were among the big fallers. Shares in Tullow Oil fell 3.7%, or 29.5p, to 761.5p, the biggest faller on the FTSE 100, while Cairn Energy dropped 3.5%, or 97p, to £27.13.

Energy shares fell amid talk of profit-taking and as US crude dropped to $108.55 a barrel, its lowest level since mid-April, as worries receded over the impact of hurricane Gustav. "There's been a run up in the shares of late with strong earnings and now people are just cashing in," one trader told Reuters.

For more information visit Guardian Online

Labels: Barratt Developments, Bovis Homes, Gordon Brown, House market, Housebuilders, Persimmon, property development, property prices, property trends, Taylor Wimpey, uk housing, Wolseley

A leading group of property workers has called on the Government to kick start the housing market, as new figures showed that people selling their houses are being forced to cut almost 10 per cent off the asking price to secure a sale.

The Royal Institution of Chartered Surveyors (RICS), said that the Government’s attempts to drag the housing market out of the doldrums have been “limited”, and has made a number of suggestions to kick start activity.

The Government is tomorrow expected to announce a series of new measures to help struggling homeowners and first-time buyers.

Proposals are forecast to include improved support for people facing repossession and shared equity schemes for those trying to get on the property ladder.

Read more at Times Construction news

Labels: falling house prices, House market, House prices survey, Housing Minister, property prices, property trends, RCIS, uk housing

Property bargains are increasing daily as sellers cut their asking prices in an attempt to make wary buyers commit in a slow summer market – but the mortgage drought and a loss of confidence among buyers means that few are taking advantage.

Sellers are asking £5,403 less for their homes than a month ago, with the typical price of a house down, on average, by 2.3 per cent at £229,816, according to a survey on Rightmove, the property search website.

In London, where the market has deteriorated sharply, asking prices have dropped by £21,096, or 5.3 per cent, to an average £379,162 in a month. Prices are down 3.8 per cent in the capital over the past year, compared with 4.8 per cent across the UK.

Despite such reductions, properties appear to be more difficult to sell, with Rightmove-registered agents reporting 78 unsold properties on their books, up from 77 last month. Miles Shipside, a director of Rightmove, said: “Buyers are currently benefiting from the best choice in years.”

Rightmove blames the mortgage drought for the state of the market, adding that transactions are in danger of dropping to levels last seen in 1959.

Despite fears that there could be a surge of properties put on the market as the slumping economy and soaring prices forced more borrowers into difficulties with their mortgages and pushed asking prices even lower, Rightmove says that there is no sign yet of a rush of homes for sale. New listings are 106,000, about 25 per cent lower than typically seen at this time of year. Mr Shipside said: “Those who do not have to sell are holding off.”

Read the full article at Times Online.

Labels: falling house prices, findaproperty, House market, property analysis, property prices, Rightmove, uk housing

THE trade body that represents hard-pressed estate agents is to create its own free advertising website, a move that threatens to torpedo the business plans of its quoted rival Rightmove.

The National Association of Estate Agents, which represents residential estate agents, is planning to launch Property Live in October and is being supported by its 10,000 members.

The new website could prove devastating to sites such as Rightmove and Findaproperty.com, which charge a monthly subscription of up to £495 to advertise houses and flats on their property portals.

Any further upgrades, such as displaying extra photos, can cost an additional £100 per property.

Article continues at Times Online

Labels: findaproperty, free house advertising, free propoerty listings, House market, National association of estate agents, property live, property prices, Rightmove

The chancellor, Alistair Darling, is prepared to disappoint millions of would-be home buyers by ruling out proposals to revive the housing market, Treasury insiders warned last night. After a chaotic week of claim and counter-claim about Treasury plans to suspend stamp duty for first-time buyers, Darling has hardened his stance against the move, which he believes could cost billions to little positive effect.

Senior officials said the Chancellor might well take no action to prop up the market in the Pre-Budget Report this autumn. 'Alistair is not going to be buffeted into doing something by headlines,' said one insider. 'If the evidence is there that suspending stamp duty would help, then we will look at it. But at the moment the evidence is not there.'

Although work is under way on a range of options involving possible changes to stamp duty and other measures to help buyers, there is deep scepticism about the idea in the Treasury.

Read more at Guardian Online

Labels: Alistair Darling, chancellor, House market, property analysis, property prices, Stamp duty changes

Britain is on course for a re-run of the negative equity crisis of the early 1990s, with one in seven UK homeowners facing the prospect of having a property worth less than their mortgage, the ratings agency Standard & Poor's said today.

The company predicted that house prices would tumble by a further 17% over the next year, prompting a rise from 70,000 to 1.7m households in negative equity - the same as at the depth of the housing-market meltdown of the early 1990s.

Andrew South, a credit analyst at S&P, said: "The downward trend in UK house prices now seems well established, and we expect prices to continue falling in the near term".

House prices have been falling at their fastest rate on record in recent months, but the previous boom in property values means that only a fraction of Britain's home-owners - 0.6% - are currently in negative equity. The average UK mortgage is for 54% of the value of the home.

S&P warned, however, that for every further percentage point fall in house prices, a further 0.5%-1.5% of borrowers (between 60,000 and 180,000) could enter negative equity. Noting that the trough in the cycle would not be reached until 2009, S&P said: "At this point, we expect 1.7 million borrowers - around 14% - would be in negative equity."

The company said borrowers in the buy-to-let and sub-prime sectors were most at risk from negative equity. "A further 17% decline in house prices could put around 24% of noncomforming borrowers into negative equity, compared with only 13% of prime borrowers."

Read the full article at Guardian Property news

Labels: Mortgage rates, negative equity crisis, property prices, S and P, Standard and Poor, sub prime borrowing, uk housing, uk mortgage market

The housing market could define Gordon Brown's leadership more than any other area of policy. Tony Blair promised education would be his priority; Mr Brown's slogan was not quite "housing, housing, housing" (he preferred some clever-clever guff about "passions" and "priorities") but at the outset he promised 3m new homes by 2020, that environmentally friendly eco-towns would be built, and that the planning system would be streamlined so all this could happen. No doubt about it: he would be the housing prime minister.

All those hopes are now so much dust, thanks to the credit crunch. Housebuilders are either going bust or downing tools, while mortgage lenders are barely lending. Mortgage approvals are down 70% from this time a year ago, according to a report yesterday - which will surely be reflected in sliding house prices over the next few months.

This is bad news for the housing prime minister; but it is terrible for the economy, whose strength he has boasted about so much. That the home-owning British feel wealthier when their houses go up in value may be regrettable, but it is also true. The housing downturn can already be felt on the high street - as it worsens it will keep sending shockwaves through the UK's lopsided economy. A drop in house prices and a calmer mortgage market are vital, as even ministers agree; but a headlong fall in prices and a near-shutdown of the mortgage supply naturally worries policymakers.

The government's interim report on the mortgage industry, published yesterday, is part of Mr Brown's attempt to thaw out the housing market. No other party has tried to tackle the problems in the mortgage market head on. The Lib Dems' Vince Cable is the patron saint of financial re-regulation, but even his policies are a bit thin here. Yet on any list of pressing problems that politicians need to think about, the mortgage drought must rank very high.

Article continues at Guardian Comment is Free

Labels: Gordon Brown, Housing Minister, housing policies, property analysis, property prices, property trends, uk housing, uk mortgage market, US house prices, Vince Cable

Now that school is out and the sun is making an overdue appearance, a property buyer’s thoughts inevitably turn to holiday homes. And, whether because of rising air fares, carbon-footprint dilemmas or the strong euro, Britain is looking increasingly attractive. But where should you buy - and, given all the doom and gloom out there, is now the time to snap up a bargain?

The prices of large homes in traditional honeypots such as Salcombe, in south Devon, West Wittering, in West Sussex, and Southwold, in Suffolk, appear to be remaining steady despite these straitened times, because buyers don’t want to miss the chance to purchase property with direct sea access and the best views. “In these hot spots, houses don’t come up often, so they are holding their own,” says Michael Bedford, of Bedfords estate agency in Aldeburgh, Suffolk.

“People are increasingly looking to holiday in England – they say to themselves, ‘Petrol’s gone up 50p, so let’s buy a £500,000 house.’ ” Elsewhere, however, it is possible to pick up a bargain, as overstretched second-homers find their beachside pad is one luxury too many.

“At Garrington South West, we’ve seen an increase in supply in secondary holiday areas,” says Phil Spencer, the property-search expert and Sunday Times columnist. “While Salcombe is holding up well, more people are releasing property in cheaper locations nearby, such as Dart-mouth, that they perhaps shouldn’t have bought in the first place.”

Liam Bailey, head of residential research at Knight Frank, agrees: “Many of the prestige properties in top locations might not come on the market in two or three generations. Prices haven’t collapsed, as some predicted, but look to negotiate a bargain if you’re breaking into the market. Houses are likely to be cheaper than last year and cheaper than in two years’ time.”

When searching for your summer pad, make sure you aren’t buying it only for the roses around the door, Spencer advises. “Don’t buy a house just because it’s pretty. Summer holiday homes are all about ease. Make sure the house is within walking distance of shops and the beach, has access to parking and has a good view.”

Read the full article at Times Online

Labels: holiday homes, Knight Frank, property analysis, property prices, second homes, UK coastal property guide, uk housing

House prices collapsed last month at their fastest rate since the Thirties; only 42,000 mortgage deals were agreed in the most recent figures - the lowest since records began; and housebuilders are laying off thousands of workers.

In this calamitous housing market, it is rare to find a building boss who has any good news, but Chris Chapman, chief executive of Cloud Nine, is one. Based in Redruth in Cornwall, the company has so many inquiries he is considering expansion - just about the only housebuilder to be doing so.

Cloud Nine's booming order book may have something to do with the heating costs of the homes it builds. One of its two-bedroom houses has a fuel bill of just £26 a year and annual running costs of £346. Cloud Nine is now producing some of the most advanced eco-homes in the world, at affordable prices. A basic two-bedroom house costs £88,000, plus land. For a four-bedroom detached home, you can expect to pay £167,000 plus land.

With landholders desperate to find buyers, Cloud Nine's moment has come. Its clients appear to have the cash to buy sites outright. 'We are getting a stream of people who want to buy our houses, many of whom have the finance,' said Chapman. 'We are looking to pair these up with developers who have plots, so we can create eco-hamlets, with customers buying off-plot. This is a major reduction of risk for all concerned.'

The firm has a production capacity of 250 homes a year. The houses are built in Poland on a production line, which dramatically cuts costs. Panels are pieced together on a modular basis - a bit like a sophisticated flat-pack.

Read the full article at Guardian Business Online

Labels: Cloud Nine, eco-homes, first time buyers, flat-pack homes, Housebuilders, Housing market, property prices

Kier Group, the construction, housebuilding and services group, reassured investors that it would meet full-year profit expectations this morning, despite the mounting woes afflicting the property market.

The company, which this month announced 350 job cuts in its residential division, said it continued to see "little evidence of a slowdown in the markets for construction and support services, both of which continue to perform strongly and have record order books".

The shares, which have fallen by almost 60 per cent over the past 12 months, rose by 35p to 945.5p, up almost 4 per cent.

Kier, which was involved in the construction of the Channel Tunnel rail link, said the mixed fortunes experienced by various parts of the company reinforced the benefit of having a range of businesses operating in different sectors of the market.

In a trading update covering the year to the end of the June, Kier said that the level of tender awards in construction had been "very high" and its strong order books reflected continued demand from both public and private sector clients.

It said the division continued to generate strong cashflows, contributing to a year-end net cash balance for the group of more than £140 million, not far short of the £148 miilion balance this time last year.

Article continues at Times Business Online

Labels: House market, Housebuilders, Housing market, Kier Group, property development, property prices

A scheme to make homes more affordable by allowing first-time buyers to rent a property as they save up to buy it has been announced today by the government.

Under the pilot scheme, households earning up to £60,000 will be able to rent a new home at a discounted rate for a period of two or three years while building up a deposit to buy a share in it.

Rents will be 80% or less of the real market value.

The scheme, which will be managed by the Housing Corporation, will be open to buyers who qualify for the government's new-build HomeBuy scheme, but are currently unable to buy.

When the buyer can afford to, he or she can buy a share of the property of at least 25% and continue to pay rent to a housing association on the remaining share.

Ultimately, the buyer can purchase a 100% share in the property, or move and take the equity built up in their share.

Earlier this year the government extended the HomeBuy scheme, opening it up to all first-time buyer households earning up to £60,000.

The government said the Rent to Homebuy scheme was designed to give more choice and flexibility to first-time buyers who have been hardest hit by the credit crunch.

Since the start of the year, all of the 100% mortgages available to new buyers have been withdrawn and many lenders have started to ask for a deposit of at least 10%.

Despite price falls, the average price of a property in the UK is still more than £180,000, according to Halifax, meaning a first-time buyer would need to raise a deposit of around £18,000.

Article continues at Guardian Online

Labels: first time buyers, Halifax, homebuy scheme, House market, property prices

Housebuilders ploughed on with their growth plans at the top of the market and now they're paying the price, finds Mark Leftly.

Once again, Tony Pidgley, the Barnardo's boy turned multimillionaire residential builder, is set to make a killing out of a property downturn. While his peers at Barratt and Taylor Wimpey were getting ready to announce mass redundancies and desperately trying to shore up their balance sheets in the worst housing crisis since the early 1990s, the 60-year-old chief executive of Berkeley announced two weeks ago that the company would spend £350m on cheap land.

Berkeley board members had noted a 25 per cent fall in land prices, so decided to go buying in a move that in effect calls the bottom of the market. Pidgley made the same call in 1991, making him something of a legend in the close-knit world of housebuilding. "By and large the reaction from our shareholders has been first class," says Mr Pidgley, with the biggest of smiles. "The vast majority of them trust the management."

Investors in housebuilding's "big three" – Taylor Wimpey, Barratt Developments and Persimmon – have been far less trusting: their share prices have all lost more than 80 per cent of their value in the past year.

For Mr Pidgley, the game is simple: a decade of uninterrupted growth should have meant that builders had enough cash stashed away for the fall that was bound to occur in such a cyclical industry.

"The City pushes for more and more – turnover growth, profit growth – and it rewards managers if they achieve that," sighs a source. "But the industry is not scaleable; housebuilding needs discipline."

Mark Clare and Peter Redfern, the chief executives of Barratt and Taylor Wimpey respectively, believed that the industry was scaleable – that it was ripe for consolidation. Last year Barratt bought rival Wilson Bowden for £2.2bn, while Taylor Woodrow and Wimpey merged, creating two FTSE 100 forces.

Former directors at Barratt were not convinced by the strategy; the company hadn't made a big acquisition in two decades. Last week their doubts only grew stronger as the company, burdened by £1.7bn of debt, announced 1,000 people would go from its 6,700-strong workforce.

Leslie Kent, a director and analyst at broker FinnCap, says Barratt's decision to buy Wilson Bowden at the top of the market has caused its current plight. "It paid 22 quid for every 11 quid of assets," he points out.

The falling values of those assets and the decline in house sales meant Barratt was in serious danger of breaching its banking covenants. However, a trading statement this week is expected to confirm that Mr Clare has managed to find £400m of fresh debt to help finance repayment of the Wilson Bowden acquisition. He should also announce that he has negotiated a relaxation of Barratt's covenants.

Taylor Wimpey's problems run even deeper. On Monday the board confirmed speculation it had changed the terms of its credit facility – on the condition it raised equity. By Wednesday this capital raising was in chaos when a trading statement reported that negotiations with investors had not led to "a satisfactory transaction". If the situation is not resolved, or house prices don't rise dramatically, Taylor Wimpey will next year find itself in breach of "one or more" of its banking covenants, the statement added.

"The Taylor Wimpey stuff is really scary," says a property banker who is also a veteran of the 1990s crash.

Mr Kent at FinnCap adds that Taylor Wimpey's woes have been exacerbated by the way in which the merger was completed. Under accounting rules, one party had to be viewed as the acquirer and Taylor Woodrow was accorded that honour, with the result that Wimpey's land bank was valued at 2007 prices. As this was the peak of the market, that value have since fallen heavily, hurting the balance sheet.

"Builders that haven't made big acquisitions will find their land revaluations will not be in the same order of magnitude," says Mr Kent, before hinting that this won't necessarily protect their share prices. "The stock market takes no prisoners; all housebuilders are tarred with the same brush."

Article continues at The Independent

Labels: Barratt Developments, Berkeley Group, FinnCap, House market, Housebuilders, property analysis, property prices, Taylor Wimpey, Taylor Woodrow, Tony Pigley, uk housing

The former BBC economics editor Evan Davis said yesterday that journalists could have done more to warn the public about the credit crunch that triggered the current housing price crash and general financial turmoil.

Davis, now a presenter on BBC Radio 4's Today, said the media may have helped to drive up the market by over-reporting statistics on rising house prices in the runup to the credit crunch crisis.

"I do ask whether we did our best to warn people of impending problems during the upswing of the [economic] cycle," Davis said at the Radio Festival in Glasgow yesterday.

"My line is, 'My God, we tried', but when everything is going well people don't want to hear it. We suffered from giving warnings a bit too early in the whole cycle.

"If, like me, you were saying in 2002-03, 'Remember folks, house prices can go down as well as up', by 2005 that warning was beginning to lose a bit of credibility," he added.

"We did warn them but didn't warn sufficiently loudly or clearly, and might have warned a little too early."

Davis, who was interviewed by his BBC colleague Jeremy Vine in Glasgow, said the media may also have helped inflate the market by reporting on every new house price survey - even when several of them were coming out in the same week.

"There was a period when online - not just online and not just the BBC - when house price stories were very interesting," he added.

"If you report the same thing five times then it sounds like they are going up even more. We in the end drive these things up just as the media did in the dotcom boom."

Read more in Guardian Housing news

Labels: Evan Davis, House market, property analysis, property boom, property prices, uk housing

The scale of the problems facing the building industry was underlined yesterday when new figures showed British construction activity fell at its fastest rate in 11 years in June.

The Chartered Institute of Purchasing and Supply's construction PMI index fell for the fourth straight month to 38.8 from 43.9 in May - the weakest reading since the survey began in 1997. The housing sub-index was also the lowest ever, falling to 25.6 in June from 32.7. A score below 50 indicates a contraction.

"Housing bore the brunt of the credit crunch fallout, reflecting the steep decline in new housebuilding," said Roy Ayliffe of CIPS.

Housing minister Caroline Flint, who will publish a package of rescue measures this month, is trying to salvage the government's commitment to build 3m homes by 2020.

She said reforms would allow the Housing Corporation to pay 80% upfront to developers, rather than the current 50%, before work starts on housing projects. This would enable the corporation - a government agency overseeing social housing projects - to increase the pace of approvals and deliver much-needed affordable housing while supporting developers.

She said a national clearing house was being set up so housebuilders could approach the corporation with proposals to sell their unsold stock for affordable housing. The government has committed £200m for the purchase of unsold stock from housebuilders, which could then be used for social or affordable housing. The clearing house would give developers an indication of their chances of the social housing sector buying the unbuilt property.

She also said a further £270m from existing budgets would allow the corporation to provide an extra 3,800 homes for social rent and 1,500 shared ownership homes over the next three years.

Flint hopes the measures will prepare the industry for an upturn in a year or two year's time, as well as enabling councils to use their resources to keep the housebuilding programme going. The government's advisers - the National Housing and Planning Advice Unit - warned at its annual conference that even if house prices fell by 5% to 10%, there would still be an affordability crisis.

The government's targets for housebuilding have been fiercely criticised by regional assemblies for their lack of realism. For example, 49,700 new homes a year are proposed for the south-east compared with 28,900 planned.

But Flint said: "There is an overwhelming case for building more housing and we must remain as ambitious as possible. But ... we have to acknowledge not only the difficulties faced by individuals and families, but by housebuilders too."

A spokesperson for Shelter said: "This package gives the building industry a much needed kick-start."

Read more at Guardian Business

Labels: Housebuilders, property analysis, property development, property prices, Residential property, uk housing

Homeowners have started to drop their asking prices as the reality of the downturn in the housing market hits home, a report out today shows.

The property website Rightmove said the average house price fell 1.2% to £239,564 in June, from £242,500 in May, and further reductions would be required to sell homes where there was an oversupply. It suggested what buyers could afford would continue to deteriorate because of rising living costs and higher mortgage rates due to the credit crunch.

Miles Shipside, commercial director of Rightmove, said: "For most sellers that will mean whatever they thought of asking for their property at the peak of the boom, they need to take at least 10% off. Otherwise their property will stagnate.

"In spite of the lowest housing transactions for 30 years, new sellers had been coming to the market asking record prices. It was a mad state of affairs that defied the laws of economics. Thankfully, new sellers are now taking some proactive steps to price more realistically from the outset to attract increasingly hard-pressed buyers."

The biggest drop in house prices was in the south-east, where they dropped 2.4% to £303,828 in June. In the south-west they decreased 2.2% to an average £258,696. Prices fell 1.6% to £225,565 in East Anglia and 1.4% to £399,010 in Greater London.

Although asking prices rose in the north, the West Midlands and Wales, these areas have seen some of the steepest price falls in previous months, with average asking prices 3% lower in the West Midlands than they were a year ago, and 2.6% lower in Wales.

The lack of buyers is widely blamed on tighter mortgage lending conditions.
The Council of Mortgage Lenders said that lending almost halved during the first quarter of 2008, resulting in 142,300 mortgages.

Halifax, Britain's biggest mortgage lender, announced last week that it would raise its fixed rates on loans by half a percentage point - the 20th time it has changed its rates since the start of the year.

Homeowners who have more than 25% equity in their houses face an increase on a two-year fixed-rate mortgage from 6.49% to 6.99%. On a £150,000 home loan, this adds £47 a month to repayments.

The increase follows similar moves from several rivals in the past week, including First Direct, which raised what had been the cheapest fixed rate on the market.

The number of properties for sale in the UK now outweighs the number of buyers by over six to one. There are 25% more properties on the market than six months ago, which means that 1 million sellers are competing for just 150,000 buyers.

Average unsold stock per agency branch rose to a record 75 homes, up from 73 the previous month.

Rightmove used the asking prices of up to 200,000 properties for its figures.

Read more at Guardian Money

Labels: House market, House prices survey, property prices, Residential property, Rightmove

More and more households are hitting trouble with their debts, says Julian Knight, but there are better solutions than IVAs or sale and rent-back.

People feel the bills mounting up and then they are falling behind with their mortgage. Often they do not face up to it until they are being taken to court. Sadly in about one in five cases we advise on, we have to tell people they will lose their home."

These are the words of Frances Walker at debt charity the Consumer Credit Counselling Service (CCCS), which recently launched a helpline for people in mortgage trouble (0800 138 1111) as the rising cost of living drains their resources. Likewise, the National Debtline charity reports a 23 per cent rise over the past year in the number of people coming to it citing mortgage arrears.

Paul Mullins, chief executive at National Debtline, says some lenders, facing the new reality of falling house prices and tighter personal finances, are now giving people in mortgage difficulties a more sympathetic hearing: "Attitudes have changed from a couple of years ago. The lenders know that, in the current market, they won't get much for a property repossessed and then sold at auction."

But Ms Walker says that lenders – particularly in the sub-prime market – are still expecting too much of those in debt difficulty, applying pressure and loading late- payment penalty charges.

Under these circumstances, it's easy to see how the old maxim "desperate times call for desperate measures" might appeal to some borrowers. However, some of the radical solutions available to people in arrears can often backfire. In particular, critics have rounded on providers of individual voluntary arrangements (IVAs) and sale and rent-back schemes.

In recent years, more and more people have taken out an IVA – a type of insolvency where the debtor agrees with his creditors to repay a certain percentage of his borrowings over a set period. Sometimes, up to 75 per cent of the debt can be written off. However, IVAs are highly controversial because the firms that act as go-between often charge hefty fees and impose penalties for missed repayments. Some in the banking and debt charity sectors have also accused IVA providers of in effect mis-selling the products, persuading people to sign up when other options may be better.

All in all, says Mr Mullins, this is not a "magic bullet" solution. "If you can't pay your mortgage, an IVA won't help. Your lender has a secured charge against your property which an IVA can't get you out of. You may be able to reduce your outgoings through an IVA so you can better concentrate on the mortgage, but in reality it is unlikely to work like that."

Even greater problems can arise for those tempted by sale and rent-back. These schemes promise to pay a proportion of a home's value, normally around 70 per cent, so quick cash is obtained to pay off the mortgage company. At the same time, the seller is offered the chance to remain in the property as a tenant for at least 12 months. But Ms Walker says the CCCS does not recommend sale and rent-back to as it is "completely unregulated".

Even those in the industry acknowledge there are big pitfalls. "For starters, sellers are offered around 70 per cent of what is, in effect, the purchaser's own valuation of the property," says Dougie Lister, chief executive of sale and rent-back firm the UK Housing Alliance. "What's to stop the valuation being under the odds. In addition, most only offer a 12-month agreement, at the end of which they can chuck the tenant out." He adds that his firm offers 10- year tenancies and uses independent valuers.

So what can people in arrears do? The truth is that this is a long slog, and Mr Mullins offers the following tips: "First look at your income – are there any benefits or tax credits you're not claiming? If you have a spare room, rent it out. Then draw up an expenditure budget; you can show this to your lender and, as a last resort, you may want to ask it to extend your mortgage term." However, this will mean more interest will have to be paid. An alternative is to ask for a payment holiday. "This is a temporary halt designed to give the borrower some breathing space to sort out their finances," adds Mr Mullins. But it's completely at the lender's discretion whether they grant a holiday or not."

Unfortunately, no matter how proactive borrowers are, they are at the mercy of their lender. "Attitudes vary markedly," says Ms Walker. Some lenders expect arrears to be paid back – as well as the normal monthly repayments kept up – within a year. Others will allow longer."

And some lenders, she adds, are quicker than others to go for the nuclear option. "We hear of cases where people have only been in arrears for a short period and repossession proceedings are started. But as a rule, around three months is when lenders get very serious."

According to Mr Mullins, lenders that do rush for repossession are likely to get short shift, but only if the borrower acts. "Courts want people to stay in their homes and don't look kindly on lenders that want to repossess after a month or two of arrears. The problem is that fewer than half of people who face repossession turn up for the hearing. The courts allow 85 per cent of people who do turn up to remain in their homes."

Read more here.

Labels: CCCS, House market, IVAs, Mortgage lending, Mortgage rates, property prices

Barratt Developments has won the fiercely contested takeover battle for its smaller rival Wilson Bowden with a £2.2bn agreed bid that will create the UK's biggest homebuilder.

The deal, a record for the sector, will mean a windfall of about £700m in cash and shares for Wilson Bowden's chairman and co-founder David Wilson and his family, who together own about 37% of the company.

The auction process was sparked by Mr Wilson's announcement in July that he was reviewing his family's stake. The combined group will have a 12% market share, ahead of Persimmon, and the deal is likely to catapult it into the FTSE 100.

Barratt beat stiff competition from other bidders, including a consortium led by the Scottish billionaire Sir Tom Hunter, which is thought to have been backed by the private equity arm of HBOS. George Wimpey, another builder, also made it to the final stages of the auction.

Barratt will pay 950p in cash and 1.0647 new Barratt shares for each Wilson Bowden share, valuing Wilson Bowden shares at £22.45 each.

Mark Clare, who took over as Barratt's chief executive in October, described the acquisition as "outstanding". He said: "It creates a powerhouse for organic growth going forward. This company will lead the sector."

Evolution Securities analyst Simon Brown said: "This is a coup for Mark Clare ... who has an ambition to drive Barratt to the forefront of UK housing, and with this deal he will succeed."

Barratt has secured irrevocable acceptances from investors holding 37.7% of the shares - Mr Wilson and his family, and Wilson Bowden's directors - and any counter-offer would have to be 10% higher than Barratt's agreed bid. Wilson Bowden shares fell 38p to £22.75 on news of the agreed bid.

The acquisition gives Barratt the David Wilson luxury homes brand, with an average sale price of £203,000, and while Barratt mainly operates in the north and south of England, Wilson Bowden focuses on the Midlands. Barratt has pencilled in synergies of at least £45m from removing overlap between the two businesses and increased purchasing power, while it estimates integrating the two companies will lead to one-off costs of £35m.

Mr Clare said there will "inevitably" be some job losses, but he refused to give details. He praised Wilson Bowden's management but said Barratt had not decided yet who would stay on. The two companies employ a total of 7,500 people.

Original story from Guardian Business.

Labels: Barratt Developments, Geroge Wimpey, Housing market, property prices, uk housing, Wilson Bowden

The stream of bad news coming out of the housing market has grown into a torrent in recent weeks, with stories of falling house prices, withdrawn mortgage rates and warnings about payment shocks.

This week, even Prime Minister Gordon Brown felt he had to defend the state of the UK's housing market.

Halifax, the country's largest mortgage lender, announced that house prices fell by 2.5 per cent between February and March, which prompted the PM to concede that "there are difficulties in the housing market" but that a 2.5 per cent drop "is containable".

To help you separate fact from fiction, we reveal the truth behind the assumptions that could cost you money in a falling market.

All the best mortgage deals have vanished

Nationwide recently announced it was restricting its best rates to people with more than 20 per cent deposit but it is not true to say that there are no competitive deals available.

"For borrowers with either a large deposit or a good amount of equity in their home there are still competitive deals available," says Denise Harvey, a mortgage analyst with independent financial comparison service Moneyfacts

West Bromwich Building Society is currently offering 4.99 per cent fixed for two years, for loans up to 75 per cent of a property's value, although there is an arrangement fee of £1,999 to contend with. And Abbey is offering a one-year discounted variable rate of 5.24 per cent with a maximum loan to value of 75 per cent and a fee of £499.

And even for borrowers with less equity in their homes there are still some good deals available. For those with a 5 per cent deposit there are competitive deals available. The Cheshire Building Society is offering a three-year fixed rate of 5.49 per cent, with a fee of £899.

One thing that has changed, however, is the speed with which these rates are being withdrawn and to take advantage of the best rates borrowers have to be prepared to move quickly.

"If borrowers are looking to re-mortgage or move they should be in as good a position as possible. When they are in a position to submit an application they should have everything more or less 100 per cent perfect," says Harvey.

Don't buy now

For first-time buyers struggling to get on the housing ladder falling house prices are very welcome. However, unless prices start to fall at a consistently fast rate the decision to wait could be a false economy, warns Melanie Bien, of mortgage broker Savills Private Finance.

She says that unless you are living with parents, the amount that a prospective buyer pays out in rent, particularly in parts of the South-east, can offset any decrease in the purchase price of a house.

Someone paying £800-a-month rent, for example, would pay an extra £4,000 by delaying a purchase for five months.

"While you would have been paying a mortgage if you had bought instead of renting, you will still want to make sure you end up in front once the difference is deducted from the potential fall in property values," adds Bien. "First-time buyers would be better off making their decision based on affordability and finding a suitable property."

Andy Pratt, chief operating officer of mortgage broker Alexander Hall, says prospective buyers should talk to a mortgage broker and work out how their rent compares with the cost of buying. Buyers should also consider that buying a home is a long-term commitment and not a short-term speculation on house prices.

"Unless you believe house prices are going to correct by 20 per cent or more, it is a long-term investment and people should be out there looking. It is a buyers' market and there are some bargains to be picked up," says Pratt.

No deposit – no mortgage

Mortgage lenders have been keen to move out of higher risk areas of lending and, as many first time buyers are now finding, high loan to value mortgages are one of the areas they are avoiding.

First to go were those deals offering more than 100 per cent of a property's value, as a combination of a mortgage and personal loan, and the last two weeks have seen an increasing number of lenders move to withdraw loans offering up to 100 per cent of a property's value.

"In essence, all the 100 per cents have disappeared and there are fewer lenders offering 95 per cent. So there are some mortgages available but their criteria for 90 per cent or higher are far tighter than they were before," says Pratt.

To get around this, he suggests speaking to family to try to raise the deposit. "Be prepared to consider parents and family for deposits or look at finding some other funding, such as savings they have made for a rainy day, and use as much as they can for a deposit," Pratt adds.

Buy-to-let landlords are fleeing the market

Many commentators have predicted a deluge of buy-to-let property coming back on the market as landlords try to exit the market, encouraged by a combination of low rental yield, falling house prices and a change to the capital gains tax (CGT) rules – which means many owners of second homes will pay only 18 per cent instead of 40 per cent CGT on the profits of a sale.

Alexander Hall's Pratt says long term professional landlords are in the market for the long term and are not put off by market jitters. But part-time landlords, with only one or two properties, will be looking at the exit.

"The dynamics have fundamentally changed. A large proportion of those will consider selling and looking at other investments," says Pratt.

However, while the tax changes will encourage some "profit taking", demand for rental property is still high and the majority of landlords are in it for the long haul, adds Bien "Most landlords see property as a viable alternative to a pension, as a way of saving for retirement, so regard it as a long-term investment," she says.

Is there going to be a house price crash?

Prices are certainly coming down. The 2.5 per cent drop reported by the Halifax is the biggest single drop in house prices since the price crash of 1992.

But this is not an exact picture, as prices are still 1 per cent higher than they were last year and there are big regional variations. Prices in Greater London are up by a further 1.6 per cent this month, and in the East Midlands they are up by 2.2 per cent. But this is offset by some big falls, with prices in Wales and the West Midlands down almost 5 per cent.

Martin Ellis, chief economist at Halifax, says that a house price crash is unlikely. The crash of the early 1990s had a different economic profile with rapidly rising inflation and big increases in interest rates and unemployment.

"That's a long way from where we are at the moment," Mr Ellis says. "Yes, we're expecting to see the economy slow over the course of 2008, and that's likely to see some upward movement in unemployment but we don't expect this to be dramatic." His prediction is for "low, single-digit" house price falls this year.

But others estimates are not so optimistic. The International Monetary Fund suggests in a report published this week that the UK housing market will follow the US example, but on a two-year time lag. This would be very bad news for UK homeowners as the US house prices fell by more than 11 per cent in 2007.

For more info visit the original story here.

Labels: Alexander Hall, Halifax, House market, IMF, Mortgage lending, Mortgage rates, Nationwide, property prices, uk housing

Owners of poorly maintained homes or those in scruffy neighbourhoods must slash their prices by as much a fifth if they want to find a buyer. But, despite the downturn, grander properties in most upscale locations are still selling for more their original asking price, according to research from Savills conducted for The Times.

The only exception to this ‘the best sells, the rest sticks’ trend, is those properties between £1 million to £2 million in London’s smartest postcodes, favoured by City executives.

Job losses in the Square Mile and Canary Wharf mean that any owner who needs to move quickly must accept a price at least 6 per cent lower than at the height of the boom in 2007.

Simon Edwards of Savills, Hampstead said: “A year ago you could put a house on the market for £1 million and sell it for £1.05 million. Now it would probably make £950,000. That £100,000 difference effectively means a 10 per fall in prices.”

‘Blighted’ homes, those that are unmodernised, or in lower grade locations in all parts of England are changing hands at prices 6 per cent to 20 per cent lower than a year ago.

This would suggest that the market has fallen more sharply than the major property prices indices indicate. Halifax figures out yesterday reported a 3.8 per cent since May 2007.

However, some sectors are relatively immune, with what Savills terms ‘best in class’ homes in all price brackets still buoyant. If you want to dispose of a £2 million-plus property in the Midlands or the North, you should find a ready buyer and expect to pocket more cash than a year ago.

Original article here.

Labels: House market, House prices survey, property prices, Savills

The Bank of England held interest rates steady at 5% yesterday as it decided inflationary risks were too great to allow it to cut borrowing costs to boost the flagging economy.

The monetary policy committee's decision followed a flurry of gloomy data about the state of the economy in the UK and beyond, and appeared to be backed by a senior figure at the International Monetary Fund, who suggested global inflation is back and policymakers should act aggressively if things start to get out of hand.

John Lipsky, the IMF's deputy managing director, said in New York: "Signs of more general inflation pressures would justify a decisive policy response, lest the impressive gains in global stability attained in recent years be sacrificed."

There had been calls for the Bank to match last month's quarter-point cut and bring some relief to the struggling property market. Nicholas Leeming, of propertyfinder.com, was unhappy at the lack of action: "The Bank can't afford to wait another month before it acts again. Mortgage lenders have all but withdrawn from the market, leaving many homebuyers unable to qualify for financing and many unable to get it at a price they can afford.

"The housing market has come to a standstill but there's no shortage of buyers, just a shortage of mortgages, which is now impacting the wider economy. Inflation remains a threat, but further immediate intervention, as well as future rate cuts, is now essential to stimulate lending, the housing market and the economy."

The decision had been widely expected in the City, though some economists had expected the MPC to cut rates after a run of weak data from the dominant services sector, the manufacturing sector, the housing market and the retail sector.

David Kern, economic adviser to the British Chambers of Commerce, said he was disappointed the MPC had not cut rates. "We believe this decision was a mistake given the serious threats to economic growth. The MPC has missed a valuable opportunity to underpin business and consumer confidence and to limit the potential damage to the economy."

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said that slowing economic activity was the most pressing issue for the authorities. "Housing transactions have collapsed, consumer confidence has sunk to its lowest level since 1992, the service sector appears close to stagnation according to the latest CIPS survey and the retail sector is under immense pressure."

With mortgage approvals down nearly to half what they were a year ago and housebuilders' reservations having tumbled by two-thirds, economists are concerned that falling house prices and tumbling consumer confidence could lead to a slump in consumer spending, which accounts for two thirds of the economy.

Latest estimates suggest the economy has slowed to well below its long-term average growth rate and is likely to slow further. However, the MPC is conscious that inflation is above its 2% target and likely to rise in the coming months.

Lipsky said inflation concerns have resurfaced even as global growth slows. "The effects of the slowdown are being felt most keenly in the US, but growth in all regions of the world is slowing," he said.

The IMF remains optimistic that the world will not experience a return to a 1970s-style inflation spiral, although the risk of such an outcome could not be dismissed, Lipsky added.

Oil prices hit a fresh high of $123.93 on Wednesday and the AA is releasing figures today showing the cost of motoring has risen 11.5% over the past year.

The government will announce measures today to help homeowners facing difficulties with repaying their mortgages.

The European Central Bank left eurozone interest rates at 4%. The ECB faces higher inflation than in Britain so is even more reluctant to cut borrowing costs.

Full story posted here.

Labels: Bank of England, ECB, Housing market, IMF, MPC, property prices, RICS, UK Interest rates

Land and property developer switches focus to sites offering a mix of housing and commercial premises.

MacDonald Estates, the land and property developer, is predicting further growth this year despite tough market conditions after posting a profit of £5.1m for 2007.

The figure is an increase of 14.1% on the previous year and the ninth consecutive year of profit growth for Macdonald, started by entrepreneur Dan Macdonald in 1998.

But the Edinburgh-based company is planning to shift its long-term focus from purely commercial developments to building strategic new “mini-towns” including a 330-acre site it has identified in central Scotland. Other sites include Inverness and St Andrews.

Macdonald, chief executive of Macdonald Estates, said that by 2012, its focus will be almost exclusively fixed on community developments, with local power generation, sustainability and infrastructure as well as commercial premises.

“I am confident we will see the continuation of further profit growth through to 2009 as a number of our developments reach maturity,” he said.

The first site to be developed is a 260-acre site at Balloch Farm, Inverness, with a mix of housing and commercial. All the sites Macdonald has identified are in areas which are likely to be rezoned. Balloch is up for zoning in 2011.

“These new settlements are going to be the focus of the business and will allow us to use the expertise we have built in working with planners from the outset rather than just slapping an application in for consideration,” said Macdonald.

“Some will have gestation periods of 10-20 years although others might come through more quickly.

“These are not the eco-towns that Gordon Brown talked about but smaller mixed developments in areas where there is demand.”

Some of the other future developments for the company include a planned £100m hotel and office development at the SECC Glasgow and construction work on a £30m development at Falkirk Gateway, which starts later this year.

Macdonald also has plans to open an office in Dublin, furthering a commitment to business in the Irish republic. Plans are about to be submitted for a ¤40m (£31m) retail park at Portlaoise, an hour’s drive southwest of Dublin.

Macdonald appointed former Scottish Enterprise Fife chief executive Joe Noble as director of strategic development and infrastructure for the company last month.

Macdonald said: “I am in no doubt that we will see recessionary times and hear more accounts of bank write-offs, a further slide in capital values, greater inflation, raised debt, high bank charges, fire sales and a restrictive residential market.

“We should not delude ourselves. The Scottish market will be affected to a great extent.”

Original story here.

Labels: Dan Mcdonald, Macdonald estates, property analysis, property development, property prices, Scottish property market

With so much media speculation about a housing slump and the dreaded credit crunch, we thought it might be useful to do a feature with just plain simple facts. With that in mind here's an overview of the current state of play in the UK housing market:

Average Cost: £218,594
Detached: £342,895
Semi-detached: £197,833
Terraced: £174,208
Flat: £201,424
Change in last quarter: -1.65%
Change in last year: +3.7%
Sales: 167,050

Figures courtesy of the BBC.

For more data on the mortgage market, see the results of a new Times survey, published this week.

Labels: House market, market data, property prices

House prices could fall by 25 per cent if the credit crunch persists, with the market declining by 10 per cent this year and by a further 15 percentage points in 2009, a new study suggests.
The pain will be felt in all but the most exclusive postcodes, according to Savills, the estate agent.
However, action by lenders could limit the credit crunch impact to a slide of 6 per cent.
Savills’ revised forecasts coincide with figures from Hometrack, the property data business, showing that house prices have dropped a further 0.6 per cent in the past month, the seventh consecutive fall.

Estate agents polled by Hometrack said that prices are 0.9 per cent lower than a year ago.
The worst-affected areas are in East Anglia, the West Midlands, Greater London and Wales.
Prices are now sliding in 51 per cent of postcode areas; a month ago they were falling in only 28.8 per cent of areas. Agents say that it now takes nine weeks to sell a house; a year ago it took only about six weeks.

Buyers are achieving 93 per cent of the asking price on average.
Yolande Barnes, Savills’ director of residential research, said that if home loans were to become more freely available soon, prices could be a mere 4 per cent lower by the end of this year and ease by another 2 per cent in 2009. But she gave warning of greater difficulties if the banks did not end the mortgage drought.

“It could have very serious consequences for the national housing market and economy in general,” she said.

Amid the turmoil elsewhere in the country, demand for London houses costing above £5 million is likely to continue unabated, with international buyers having no need to borrow. Last week, the would-be buyer of a £25 million mansion was gazumped.

A divide is opening between what Ms Barnes terms the “super-wealthy” and the “merely wealthy”. City executives in the latter group fear job losses and, like everybody else, are struggling to secure home loans.

As a result prices for London properties between £1 million and £2 million are under pressure and could fall by 10 per cent – or even as much as 16 per cent.
Eventually the whole market should recover from a severe downswing – but slowly, Ms Barnes said. She believes that there could be a bounce-back by 2012, with lower prices making property more affordable.

The continuing shortage of homes in most regions should lend support to prices.
Construction companies such as Persimmon, which are suffering from the credit crunch, are already downing tools, which will aggravate the shortage of property.

Ms Barnes is the latest commentator to revise downwards her predictions for 2008, taking into account the bleaker economic outlook and the withdrawal of credit.
Knight Frank, another leading estate agent, has revised its forecast from a rise of 3 per cent in property prices this year to a fall of 3 per cent.

Ms Barnes assessed the chance of a 25 per cent slump at 40 per cent and a 6 per cent slide at 60 per cent. The gloomier scenario is based on job losses spreading beyond the financial sector to other industries such as housebuilding.

She said: “There are some sites on which homes were to be built which are no longer viable unless the construction company can renegotiate the deal.”

In recent weeks the banks, scarred by sub-prime debt, have become even more reluctant to lend to homebuyers. Household finances are also under strain from higher energy, food and tax bills.

Last week, the Bank of England extended a £50 billion bailout to the banks, but this has yet to be passed on to borrowers. On Friday Halifax increased the cost of some of its deals by 0.6 per cent.

Richard Donnell, director of research at Hometrack, said: “Weak confidence is effectively resulting in a ‘buyers’ strike’ with households sitting on the sidelines and waiting to see how events unfold.”

Labels: property prices