David and Claire O’Donnell didn’t realise how hard it would be to sell when they decided to put their five-bedroom house in Hampshire on the market for £1.7m in August. The couple, who have two children, Phoebe, 16 and Miles, 11, wanted to sell up and move towards Maidenhead, in Berkshire, where David, 52, a director of a sales and marketing company, works. Although they dropped the price to £1.55m in September, the property failed to sell. The O’Donnells have now taken Orchard House off the market and are planning to relaunch it in the spring.

“I think there will be a little more incentive out there then for people to want to buy,” says Claire, 51, who renovated the house and is hoping to start an interior- design business. “People won’t rush back into the market, but life goes on and people can’t keep things on hold for ever.”

So, what about the rest of us — will life go on or will our property plans, too, be put on hold? Who will be the winners and losers in 2009?

Cash buyers

Sold your house at the peak of the market and been renting since?

Give yourself a pat on the back — you’re in a pretty strong position. Not only will you be ready to go once you find your (heavily discounted) dream home, the rent you are paying in the meantime could be falling because of a surplus of property being let out by those who cannot sell. Knight Frank reports that rents at the top end of the London market, for example, fell by 9.6% during the last three months of 2008, the largest drop since it created its Prime London Rental Index in 1995.

The challenge is knowing when to buy: as with all financial markets, you only know house prices have bottomed out once they start to rise again. Advice from the experts? “If you see what you want, buy it,” says Richard Gaynor, head of country houses at Savills. “Because if you don’t, and somebody else does, it won’t be replaced.”

Verdict: winners

Investors

During the latter stages of the boom that came to an abrupt halt last year, investors were motivated more by the prospect of capital gains than by yields. In other words, they were driven by the hope of a rise in the price of their property, rather than by the rent they could earn, which ceased to be high enough to cover the cost of borrowing.

Common sense has reasserted itself. In some cases, especially properties bought at auction, yields (that is, the annual return as a proportion of the price) are back up at 7%-8%. There is, however, a danger that whatever you buy may fall in value, although you can try to mitigate this by driving a hard bargain when purchasing. It’s enough to turn anyone into a property vulture.

Verdict: winners

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