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What is the latest on house prices?

Another tide of bad news washed over homeowners this week, with Communities and Local Government (CLG) figures showing that the value of an average property had dropped to £217,737 in February, the lowest level since last June. Meanwhile, the Royal Institution of Chartered Surveyors (RICS) released its gloomiest survey of the housing market in 30 years. It said that 78.5 per cent more surveyors reported falling house prices last month and that there had been a sharp fall in new-buyer inquiries and agreed sales.

Is this across the board?

How to avoid the worst of the property market slowdown

The forecast is getting gloomier, but there are ways for canny buyers and sellers to avoid the worst of it

BACKGROUND

• Who's to blame for the housing market slowdown?

• Housing market: property prices in Britain's hotspots and notspots

• The luxury property market shrugs off the slowdown

• Families at risk of negative equity

Q&A: is there any chance of some good news?

Why do mortgage lenders not want customers? Is it now impossible to get a loan? Will borrowing soon get cheaper?

BACKGROUND

• Video: A good time to invest in property?

• Will the global credit crunch dampen housing demand in spring?

• Country homes in short supply despite slowdown

• Credit crunch: questions and answers

How to fight your way out of a housing market slowdown

Do you have the clout to tough out the downturn? Emma Wells and Lucy Denyer sort victors from victims

BACKGROUND

• The buy-to-let market is thriving, but too risky for most newcomers

• 20 ways to avoid mortgage meltdown

• Recession and repossession: surviving a great fall

• First-time buyers hit as lenders pull plug

Related Links

• How to avoid the worst of the property market slowdown

RICS members suggest that not all areas are engulfed in this gloom: prices are still rising in Scotland and are falling least quickly in the North West, Wales and London. Sentiment is worst in East Midlands and East Anglia - yet just a week ago Halifax revealed that prices were up 2.2 per cent and 1.4 per cent respectively in those two regions last month.

Which properties are most resilient?

The CLG data shows that prices have dropped most sharply for flats, down 2.9 per cent in a month, followed by semi-detached and detached houses (down 1.5 per cent), and terraced houses (1.1 per cent). The price of bungalows has dropped by only 0.6 per cent.

Why is the mood so bad?

Many buyers are struggling to find lenders who will supply them with the credit they need - and the rest are being forced by the economic uncertainty to act cautiously, according to RICS. Prospects are particularly grim for first-time buyers and small-scale buy-to-let investors. Now, the spectre of “negative equity” has emerged: research by the credit-checking firm Experian has highlighted the areas with the highest loan to value percentage, and thus the least buffer for homeowners if prices fall farther. Danger zones include parts of Glasgow, southeast London and Manchester; the safest areas appear to be in prime Central London and Chichester.

Just how big is the mortgage shortfall?

Last year mortgages in the UK were worth £108 billion, but the Council of Mortgage Lenders cautions that it will be as little as £54billion this year. This huge mismatch explains why so many apparently credit-worthy borrowers cannot secure the sums required to meet property prices that are still very close to record highs.

Any good news?

Some. RICS says that price falls could be worse, but are being contained by the small number of properties coming on to the market. This indicates that, even with higher borrowing costs and fast-rising household bills, overstretched homeowners are still managing to make the sums add up. The Centre for Economic and Business Research (CEBR) says that another interest-rate cut may come as early as next month. The CEBR thinks that the base rate will have fallen to 4.25 per cent by the end of the year - cheering news at least for those homeowners on a tracker rate.

What's the long-term outlook?

Observers are increasingly warning of the potential for significant falls - Capital Economics is predicting falls of 10-15 per cent over the next two years, while David Miles, the chief UK economist at Morgan Stanley, thinks prices might sink by as much 20 per cent in that time. But other observers think that high employment and strong demand will help to keep the market relatively strong. James Thomas, a director of Jones Lang LaSalle, says: “Given the current financial turmoil, we expect mainstream UK house prices to come off by around 5 per cent this year, with prime Central London markets proving more resilient.” Jennet Siebrits, of CBRichard Ellis, thinks that, unless conditions worsen, price falls should be contained at 4 per cent this year.

The experts speak:

Although the number of mort-gages being approved has dropped, these are being processed by fewer lenders. As a consequence they cannot cope with the levels of business. In some cases this is leading to chronic delays in producing mortgage offers, which causes problems when exchanging contracts for house purchases and tying in remortgage dates with the end of an existing deal. I would advise people remortgaging to start looking for their mortgage deal three or four months in advance.

John Postlethwaite, principal, Punter Southall Financial Management

The mood in Hampstead, St John's Wood and Primrose Hill is fairly upbeat. There are properties being reduced in price, but special homes are still selling for huge prices. What has changed is that buyers are not prepared to pay special prices for everyday properties.

Philip Green, director, Goldschmidt & Howland, Hampstead

Market conditions are cyclical. We are going to have two or three years where house prices remain static, unless you are talking about the top end of the market. What these conditions need is for agents to build a proper relationship with sellers - they need to be able to convince them that their house is worth what someone will pay today, not what it was valued at last year.

Charles Smailes, president, National Association of Estate Agents

We have had a very busy March with good instructions and, more importantly, better sales arranged than this time last year. Not all sellers are generally being sensible on price. Stock has not increased significantly and underlying the market there are plenty of people wanting to move. It is just uncertainty that is holding some of them back.

Mike Hewson, Ibbett Mosely, Tonbridge, Kent

Properties of quality, irrespective of type, are selling well if priced correctly, and there are many candidates to buy who have sold up and are renting, waiting for the right property to come up.

Peter Jones, Humberts, Cheltenham

To understand this market, you need to go back to the mid-1970s, when we had a so-called mortgage famine because building societies, which did almost all lending, agreed to limit the supply of home loans. This caused a downtrend in the number of transactions, as we are seeing now. The most vulnerable agents are those who have started in the past two to three years because they thought it was easy money. They don't have cash reserves because they probably spent it on fancy cars and offices.

Nick Salmon, director, Harrison Murray, Home Counties

We have just had a chain collapse in which there was a first-time buyer who had an offer for a 97 per cent mortgage, which was withdrawn. We tried to negotiate cashback farther up the chain but it just didn't work.

Paul Adams, Adams & Jones, Market Harborough

The market has slowed significantly, apart from anything £1.5 million or above. We had a waterfront property come on at £1.9 million and it sold in a day. Increasingly, there are buyers who see this a good opportunity for a deal on a holiday or second home.

Andy Goundry, Goundry Pearce, Truro, Cornwall

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