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THE property market has swung in favour of buyers as house price rises come to a standstill throughout much of the country. The latest figures from the Nationwide building society show that although prices have risen strongly in London, the South East and the South West over the past three months, the market beyond remained flat. House prices have even fallen in Wales, providing further confirmation that the higher cost of borrowing is starting to bite.

Buyers are exploiting nervousness in the market by lowering their offers, while a growing number of agents are advising sellers to drop their prices. Max Ziff, of Humberts estate agents, says: “About 20 per cent of deals that we would have expected to go through this month have stalled while buyers review the market.” Ziff predicts that prices will fall by 10 per cent by the spring unless interest rates are reduced by half a point before Christmas.

Buying agents are now instructing their clients to exploit the market. James Greenwood, of Stacks Search & Acquisition, says: “Buyers should be looking at getting the asking price down by at least 10 per cent, possibly more.” However, experts believe that a lack of property for sale will keep property prices from crashing. Richard Donnell, of Hometrack, the property data company, says: “If anything, there appears to be a tightening in supply in the face of greater uncertainty.”

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In London, despite strong price growth in the capital over the past three months, there are fears that property prices will experience their sharpest correction since the turmoil in the financial markets last month. A likely cut in City bonuses this year and financial job losses will particularly affect the top end of the market. That said, with a shortage of homes for sale, many agents believe that the London market will not be in the doldrums for long. Ed Mead, of Douglas & Gordon in West London, says that although some 40 per cent of buyers are stalling, there are still plenty of serious ones. “There is still plenty of pent-up demand for property. I think the current situation will shake out but it is a question of whether that will happen before or after Christmas.” Elsewhere, according to Nationwide’s figures, the North/South divide is deepening. Prices hardly moved in the North, North West, Yorkshire and Humberside and the Midlands. Liam Bailey, of the estate agent Knight Frank, says: “In northern regions, 2008 is set to pan out in a similar way to 2005. Our view is that price growth next year will stand in the zero to 4 per cent range, with some regions showing price falls.” Bailey predicts that the properties at both ends of the market will keep their value better than those in the middle. “The best-performing markets will be the affordable homes under £150,000 and those over £1 million where demand is high and supply is limited. The market which will struggle will be £300,000 to £500,000 because of higher interest rate costs and nervousness regarding market sustainability.”

Prices have fared better in East Anglia and the South West, where demand has been boosted by London buyers. Here prices rose by just over 1 per cent and almost 2 per cent respectively. In the Midlands, research from the estate agent Bidwells shows that the price of homes worth more than £1 million rose by 9 per cent over the past 12 months compared with a rise of 4.4 per cent for those under £500,000.

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