Few signs of light in gloomy housing market

Although interest has perked up, things aren't expected to improve just yet.

'It's always darkest before the dawn" is a well-worn phrase, and those involved in the UK property market – estate agents, developers and sellers – hope that it proves true as they prepare to bid goodbye to 2008. The housing market, it seems, has never been in such a parlous state. Officially, prices are about 15 per cent lower than they were a year ago but the reality on the ground is probably more akin to a quarter knocked off property values since their height in the third quarter of 2007.

Henry Pryor, an independent housing-market analyst who successfully called the top of the market in 2007, reckons the 15 per cent fall recorded by the Halifax is an underestimate. "This figure reflects only a fraction of the few sales which are going on at the moment. We have homes sold at auction. We also have – in central London – buyers from abroad who are beginning to take advantage of sterling's slide against the euro. For these buyers, prices are not 15 per cent lower than they were a year ago. They are closer to 45 per cent lower, when currency moves are taken into account."

Meanwhile, repossessed homes sold at auction – the only part of the market to see increased activity of late – are going for between 40 and 50 per cent below what they'd have fetched on the open market a year ago.

And worse could lie ahead. Unemployment is rising rapidly and could reach three million next year. Fewer jobs means mortgage payments missed, and the Council of Mortgage Lenders – says that repossessions will be up by two-thirds in 2009. This comes hard on the heels of a likely 50 per cent rise in repossessions during the course of this year.

"In 2008, the property market fell so sharply due to the side effects of the credit crunch. Mortgages dried up as did transactions and the whole market in effect seized. This will continue into 2009 but will be exacerbated by the fact that lots of people are going to lose their jobs. As a result, there will be distress sales and this will push prices lower still," Mr Pryor said.

But how low could prices sink? It is from the City that the best answer may come. "The median prediction among traders is that from peak to trough we will see house prices fall 46 per cent. The height was reached in the third quarter 2007 when average UK house prices were around the £200,000 mark by 2010/2011. This is predicted to be £109,000," said Peter Sceats, director of real estate derivative broker Tradition Property.

Mr Sceats's firm runs a market that is based on moves in the Halifax house price index. Traders in effect place bets on where UK property prices will move in future. If the core prediction among traders in this market is correct, then it means 2009 could be a whole lot worse than 2008. During the past year, the average UK house price according to the Halifax index has declined to £163,605. There could be a further £50,000 or so to come off.

But some of the big beasts of the property world are steering clear of calling the market. For example, Nationwide simply says that prices will continue to fall; a similar line is adopted by the Royal Institution of Chartered Surveyors and the CML. The Halifax, meanwhile, predicts a 20 per cent fall over 2008 and 2009 but most of that has already happened.

But David Bexon, managing director of property website Smartnew homes.com, believes that sellers will start to see some "green shoots" of recovery in late 2009. In short, he suggests that the worst of the falls could be over. "New-build firms have been heavily discounting their sale homes but this will come to an end as projects have been mothballed," he said. "This means that there will be lower supply of new houses which will have the effect of cushioning price falls."

"Outside of new build, we've already seen prices come off considerably, and those in a job could be looking at the fact that homes are much more affordable than they once were – relative to incomes. Although mortgages are very tight at the moment, this could ease a little during 2009 and people who are currently saving for a deposit will be better placed to buy. The demand is still out there."

Estate agents recorded a slight uptick last month in the number of potential buyers registering an interest – although, admittedly from a low base. Transactions are still at record lows but it seems some hardy would-be buyers are seeing how the land lies. Kerry Chaloner from financial planning firm Armstrong Watson reckons that 2009 will present an opportunity to snap up a bargain. "If you have some money to invest, now is potentially a good opportunity to take a long-term investment in the property market while prices are low. People should remember that for the next few years it is unlikely the country will experience the interest rates of the 1970s which exceeded 15 per cent," he said.

But according to Mr Pryor, buyers may be best advised to remain on the sidelines, at least for now. "From most people's perspective, with the way the economy is, it would be lunacy to pile into the housing market now," he said. "The only people I see being well placed are older people with no mortgage looking to trade down because they still have a lot of equity. Those at the bottom of the market will be a long time coming back. The bottom of the market will move into view in 2009 but it won't feel like it. In fact, I don't see confidence returning until 2010 at the earliest."

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

    They fled war in Syria...

    ...only to get stuck and sidetracked in Hungary
    From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

    Title sequences: From The Prisoner to Mad Men

    Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
    Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

    Giorgio Armani Beauty's foundations

    Sumptuous fabrics meet luscious cosmetics for this elegant look
    From stowaways to Operation Stack: Life in a transcontinental lorry cab

    Life from the inside of a trucker's cab

    From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
    Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

    Kelis interview

    The singer and sauce-maker on cooking for Pharrell
    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea