After a strong start to the year, the East Anglian market never came out of the summer recess. “The year started very well, but as the interest rates started to bite things began to slow a bit,” says Oliver Peacock, of Jackson-Stops & Staff. “Then in September there was the run on Northern Rock and that set the tone for the rest of the year. The market never got back into its stride.” Agents are bracing themselves for a difficult year to come.

Reveiw of the year

Although some house-price statistics show that East Anglia saw double-digit growth in 2007, Peacock is sceptical. “Whatever growth we had early on in the year has been eroded,” he says.

The picture painted by Halifax and Nationwide is somewhat rosier. At 11.1 per cent, Halifax figures show house-price inflation in East Anglia higher than the national average of 10.7 per cent. Nationwide's figures show slower, but still healthy, growth of 6.9 per cent. The Halifax data also suggests that there have been property hotspots in the region: ten towns had double-digit price growth over the past 12 months, with St Neots in Cambridgeshire recording house-price inflation of 25per cent, and Stowmarket in Suffolk having a price rise of 24 per cent.

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Housing costs taking their toll

The question that always accompanies fresh data showing a fast-growing housing market is: are we headed for a crash?

The forecast for 2008

“Market conditions are now as depressing as I can remember,” says John Pocock, of Pocock & Shaw in Cambridge. “The volume of instructions is down, and the few prospective buyers entering the market are being very overcautious.” Pocock believes that “media hype and speculation” have eroded buyer confidence, but other agents point to interest rates and the high cost of fuel. The credit crunch has also taken its toll. Neville Blackwell, of Collingwoods in March, Cambridgeshire, says: “The Northern Rock episode has had a tremendous effect on applicants, particularly in terms of confidence.” The latest report by the Royal Institution of Chartered Surveyors (RICS) shows that house prices in East Anglia declined for the four months to October 2007 and are falling at their fastest rate since March 2005. The RICS says that confidence is now at its lowest point since 2003.

Oliver Peacock is confident that there will not be a crash. “I believe we will see no growth at all over the next 18 to 24 months, so in real terms, allowing for inflation of about 2 per cent, we could see prices fall by about 4 per cent. If people want to sell their houses, they are probably going to have to accept what they see as a disappointing price. They may have to discount by around 5 per cent.” What is likely is that people will not sell unless they really have to. “We expect turnover to fall by about 15 to 20 per cent in 2008.”

Supply is already tight. “The stock of houses has reduced significantly,” says Alan Coy, of Bannister & Company in Felixstowe. “This is probably as a direct result of the need for home information packs.” The lack of supply, combined with continued shortage of housing, net immigration and interest-rate cuts, should be sufficient to stop house prices sliding too far.

What's hot...

Bury St Edmunds, pictured above, remains popular, and good-quality townhouses close to its town centre should be well insulated from market turmoil, Peacock says. “A lot of older couples are selling their country houses and moving into town, but they do want really good houses with private parking.” The redevelopment of the old cattle market could help to boost prices. The new scheme, known as the Arc, a mixed-use development made up of 35 shops, cafés and restaurants and 62 apartments, will be completed in 2009. “It is likely that houses in the streets near this development will see an uplift over the next few years,” Peacock says.

If you are seeking value, it can be found in villages north of the A14 and on the coast. Seaside towns tend to have higher house prices, but there are still a few offering good value for money. Halifax says Lowestoft and Great Yarmouth, with average house prices of about £140,000, also rate highly on quality of life. Felixstowe is another top destination, with prices averaging £180,000.

...and what's not

Savills says that the City bonus squeeze is likely to weaken the outlook in second-home hotspots such as Cley Next the Sea and Burnham Market in Norfolk, and Walberswick in Suffolk. “Recently these areas have taken on the characteristics of prime Central London, namely significant wealth chasing limited stock in unique locations,” says Lucian Cook, director of Savills residential research. “This has led to a significant growth in values.” Prices in these hotspots have risen by between 270 to 315 per cent over the past decade. But as the bonus outlook deteriorates, so too will the prospect of further extraordinary house-price inflation.

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