Most of us are still shaking the summer sand from our shoes but estate agents are already in autumn mode, with one question dominating all others: will house prices defy the wider economic malaise of 25 per cent spending cuts and imminent tax rises?
The prospects do not look good. The Rightmove, Nationwide and Hometrack price indices all show small falls over late summer, and the Royal Institution of Chartered Surveyors' latest measure of sentiment in the industry suggests most estate agents believe prices are now falling.
London's prices remain relatively strong, but falls are being recorded in almost every other part of England. A survey out this week shows a 3 per cent drop in prices in Scotland over the past three months.
The key forecasters, Savills and Knight Frank estate agents, predict prices will dip further by Christmas, and the house builder Bovis is warning of a "fragile" housing market with confidence sapped by a spectre of unemployment, spending cuts and tax hikes.
The worst problem remains a chronic shortage of mortgages. Santander, one of the biggest lenders, says 1.1m home owners tried but failed to sell in the past 12 months; most were frustrated by prospective buyers who were unable to secure a mortgage.
As a result of all this, many estate agents want sellers to cut their asking prices. Most autumn house sales are in September and October, after which vendors and buyers put plans on hold until the new year. That means there are just eight weeks to do the deal – exactly what Tracy and David Bliss want to do with their Somerset home.
They have cut the price tag of their four-bedroom converted barn at Holton from £895,000 to £800,000. They transformed the wreck into a home 10 years ago and at the height of the market hoped it would eventually sell at £1.2m – but not now.
"We put it on sale at £895,000 at the time of the general election but we're anxious to sell rapidly and our agent (Palmer Snell, 01935 814531) has advised a price change. We hope people can see through the economic gloom," Tracy says.
"We've painted the interior in neutral colours and we're part of an open-house weekend in September when people can see the place for themselves," she says. The couple, both recently retired, had many visitors before the summer but no offers as buyers were either unable to secure a mortgage or have been ultra-picky.
And with a glut of homes on sale – an estate agent typically has 55 properties on the market now, compared with 43 a month ago – buyers can afford to pick and choose.
"There are just over 900,000 homes for sale at present. New stock is being added at the rate of 4,500 a day," says Henry Pryor of Housingexpert.net. "June's and July's sales were up by roughly 10,000 a month on 2009 but were still half what they were in 2006 and 2007." He says the imbalance of stock on sale over the number of buyers registered with estate agents means there is only an 8 per cent chance of a vendor successfully selling their property in the next month.
Estate agents are particularly worried that buyers will be deterred by wider economic uncertainties and cuts in public spending. There are no official numbers stating how many homes are bought by public-sector staff but Savills says the figure is at least 15 per cent. Some areas are more vulnerable than others: in the North of England the figure is 24 per cent and in the South-west it is 23 per cent.
The key to kick-starting the market this autumn is to get more first-time buyers; this is particularly hard, with most lenders requiring deposits of £40,000 or more. Until far more first-timers enter the market to purchase the smaller homes of existing owners wanting to move, the lowest rungs of the property ladder will remain missing.
The Home Builders Federation (HBF) says first-time-buyer numbers in England and Wales are at a 35-year low. Those who succeed often have financial help from their parents but the HBF says the average age of an "unassisted" first-time buyer is now 37.
University lecturer Elisabetta Barone recently bought her first apartment at a scheme in Wembley, north-west London, built by the developer Quintain. Barone has lived in London for many years but can only now, at 39, afford to buy. She paid £211,000 for the property but even with that budget, she had to compromise on location.
"I'd been house-sitting for a friend in the Docklands but wanted to find somewhere for myself that was new and affordable. Despite falling prices in Canary Wharf, it was still too expensive for me," she says.
But while estate agents are pessimistic about the short-term prospects, most of the property industry thinks the basic shortage of supply compared with demand will, in the much longer term, see prices go up.
Savills says that by next summer, the growth of the past 18 months will have reversed, leaving house prices at the same levels as in late 2008, some 15 per cent off peak values. But then prices will rise over a sustained period from late 2012 with 3 per cent annual growth. So by summer 2014, they will be back to the pre-recession highs.
The firm believes the only way that forecast will not come true will be if there is a sudden surge in new homes built to meet latent demand – and that is highly unlikely.
The Government's new planning system – which has involved abolishing plans known as "regional spatial strategies" (RSS), scrapping housing targets and giving local communities a veto over new schemes – is already accused of worsening the housing shortage.
One prominent builder, Cala Homes, is asking the High Court to review the Government's actions because they leave what the firm calls a "policy vacuum". A 2,000-home Cala scheme in Winchester was recently turned down for planning permission, after years of preparation, because the strategic local plan had been scrapped days earlier.
This may be just the tip of the iceberg; the National Housing Federation claims plans for 85,000 homes in England have been dropped since the Government came to office.
"The uncertainty created by abolishing RSSs cannot be overstated. It's going to take nine months before they're replaced, if they are, and in the interim, almost nothing will happen. Even if new plans come into place, the delay will have set building rates back years," says Andrew Thomson of BNP Paribas, which funds new housing.
So in the long term, we return to the old story – a growing population outstripping house-building levels. In the immediate future, however, the autumn skies are darkening. House prices, like leaves, are expected to fall in the coming months.
Top Tips For Sellers
* Get ahead of the price curve – a small reduction today may mean less of a drastic (and painful) reduction later.
* Photography is key – make sure the agent's photographs are good and the best image leads the agent's website and written details. This doesn't have to be the front of the property, but could be a breathtaking view, a stunning kitchen or fabulous garden.
* Ensure your property is on with a proactive agent known to work hard.
* It's obvious, but first-viewing impressions count: mow the lawn, polish brasswork, clean windows, clear clutter inside and complete any outstanding DIY jobs.
Top Tips For Buyers
* Don't assume national house-price trends apply everywhere – carry out your own research on the internet and in the area where you are planning to buy.
* Make sure you have all of your finances in order and retain a good solicitor so you can act quickly when the right property presents itself.
* Present your offer seriously – show your finance, timescales and intentions to sellers, who will be reassured by your openness.
Source: Connells estate agencyReuse content