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Property prices to hold next year but sales slow
Mira Bar-Hillel, Property Correspondent18.12.07
House prices in London will not crash next year, according to the majority of pundits.
They believe prices will freeze - although a handful of experts are more optimistic and are forecasting rises of up to six per cent.
However, industry insiders agree that the number of sales is likely to be about 15 per cent lower than this year as mortgages become more difficult to arrange.
London estate agent chain Kinleigh Folkard & Hayward believes the market will remain "price neutral" next year.
Managing director Lee Watts said: "This year has been somewhat of a property rollercoaster - exceptionally buoyant for the first half of the year and then rapidly declining during the second half.
"It is possible that we will see a small rise in prices during the first few months of 2008 but that any such increases will be eroded away during the latter part of the year.
"Overall, house prices in London will remain neutral or even show a slight drop of maybe three or four per cent outside the central areas.
"City bonuses will obviously fall but there will still probably be enough to buoy up the top end of the market. Bonuses may also have a similar effect on the upper-middle market place."
The most optimistic forecast comes from CB Richard Ellis Residential Research, which expects London to continue to outperform the rest of Britain with inflation-busting rises of six per cent.
Head of research Jennet Siebrits said: "We are more optimistic than other commentators, largely because the economic fundamentals remain sound.
"Significant and consecutive house price falls happen when home owners are forced to sell. With a benign economic backdrop we do not envisage that happening.
"As a result we expect a thin market in 2008 with lower levels of transactions."
Also optimistic is Lucian Cook, head of research at Savills: "We are forecasting that London will be the strongest performing region in 2008 but the rise will be only five per cent - much lower than what we saw in 2007.
"We expect the gap to widen between the best and best located properties, which will continue to perform well, and those which are blighted or in a secondary location which will become much harder unless affordability pressures ease."
However, Mr Cook agreed that the number of houses sold in the capital would slow substantially. He said: "I expect the number of homes sold in London next year to be 15 to 20 per cent lower than in 2007.
"This is due to the general financial uncertainties, the drop in City bonuses and the considerably increased difficulty in getting mortgages."
Lulu Egerton, of Strutt & Parker Lane Fox in Chelsea, said: "The market has seen and survived the 'correction' brought on by the credit crunch these last few months. Although prices have fallen away by up to five per cent already, I believe 2008 will see prices stabilise."
Some independent analysts see further falls coming. Seema Shah, of Capital Economics, said: "The bottom line is that evidence of a housing market correction is rapidly mounting.
"Given that prices have already fallen by over two per cent over the past three months, our prediction for house prices to fall by three per cent in 2008 is beginning to look too conservative.
"With buyer enquiries having fallen every month of this year, mortgage demand significantly weaker, and affordability still seriously strained, the chances are that the downward trend in house prices will continue."
Reader views (39)
A year ago I would have believed you. But I've been lied to by too many estate agents now to trust a word they say. Luckily nine months ago an estate agent refused to put an offer to a buyer that would have seen me in negative equity by now (the house was sold 3 months later through another estate agent for 11 thousand less than my offer, but has just been resold for 29 thousand less again). Illegal I am now told, but obviously this man had my best interests at heart.
- Elizabeth, Somerset
House prices are on their way down. In a poll shock, 100% of people polled by The Evening Standard stated that property prices were falling.
- Ian, Bedford
Property prices to hold next year? Only if Elvis crash lands a flying saucer on the back of the Loch Ness monster!!!!!
- Dani, Herts
This is really poor reporting and is a shameful vested interest article relying on Estate Agents who have no expertise whatsoever in the context of the piece. The least you could do is to seek balancing views of those who are NOT Estate Agents. Everyone will see through this article, which goes against a huge weight of evidence showing that house prices will continue to fall. Of course you won't print this because you want everyone to agree with this travesty of journalism.
- Leonard, Brighton East Sussex
Not only do estate agents have a vested interest in the health of the housing market, they have very little qualification to discuss it. They are good at selling houses on other's behalf, but they are not qualified to discuss the extremely complex drivers of the housing market.
This is a topic for economists more than estate agents and most of them seem to be of the opinion that the outlook is bleak for sellers.
- Henry, London
The opinions in this article are akin to asking Bernard Matthews his views on vegetarianism!
- Paul, London
You state that house sales will fall 15% next year on this.
Current sales are the lowest since 1975!
How is this consistent with stable house prices?
- Hotairmail, London
I think that some well renowned economist said that this credit crash is at the stage of the finish of the national anthems before the game begins.
- Orwell, South West, UK
The experts mentioned in the article as hardly neutral. All estate agents! Does anyone know an estate agent that is going to say house prices are going to drop? Estate agents are not economists, so respect for their opinion is this area is "zero"
- Michael Curti, Rickmansworth, Herts
Why does anyone ..
A: Ask an estate agent for a professional opinion
B: Believe an estate agent when their profession is renowned for being dishonest.
- John, London
What I am after is a measuured, professional aand unbiased view on where house prices are heading. Hmmm...let me think...I know, I'll ask a load of estate agents!
Maybe I will ask some turkeys if vegetarianism is a good idea before Xmas.
- Jp, London
Why even bother asking estate agents about the state of the market? They are hardly going to admit that prices are falling though my local agent admitted that 'anyone who's still saying that the market is rising should be locked up'.
- Peter Vuorela, London
As an Ex-pat keeping an eye on the UK housing market in general I am very surprised by the views of this panel of "experts".
It is clear that the UK as a whole and not just London has been living for too long on cheap credit and now that debt must be repaid.
In my humble opinion, when the credit continues to run dry in the New Year, coupled with a realisation that inflation is running away due to vast injections of liquidity by some of the world’s central banks, the perfect financial storm will be free to rip through the UK economy as a whole and the London housing market will be not be immune.
- Rob, Munich, Germany
These so called "property pundits" are living in a dream world. I work in the city and can assure them that the fundamentals of the UK are far from solid - a rapidly cooling economy overly reliant on inflated asset prices and a decade-long consumer lead bubble.
- Tom, London
I don't believe a word of it.
If estate agents told me it was Wednesday I would check it out independently!
Sounds like they are trying to save their jobs!
House prices are at least 20% overvalued, bills are soaring, mortgage lending is becoming stricter = house price falls.
And yields of 3-4% tell you something is seriously wrong.
- Peter, UK
Unfortunately for these estate agents, the economic fundamentals are far from sound. Reductions in consumer spending (due to the reductions in house prices), and the lack of investment capital available, due to the credit crunch, will have recessionary effects in 2008, resulting in further fall in house prices. This will further feed the loses in the banking sectors and cause more tightening of the available credit.
- Andy Dobbing, Bucks
Wow, what a staggering story. These "experts" predicting house price rises happen to be estate agents - who make their livings from selling houses. And there was me expecting them to predict falls of 10% and advising that you don't buy a house for a couple of years?
If you ask a second hand car salesman whether today is a good day to buy a second hand car, do you really expect him to tell you it's not, and that you should come back in 2-3 years when they'll be much cheaper?
Still, I'm sure they'll herd a few more suckers into the market before the crash shows up fully in the statistics (and many of the estate agents lose their jobs).
- Martyn, London, UK
Yeah right, prices will freeze like Wile Coyote in mid air.
- Anthony, London England
At a time when house prices are collapsing it is beyond belief that a group of estate agents can pronounce that the market will 'stabilise' without giving any reason for such a wild assertion. No wonder the public do not trust estate agents when this sort of misleading PR is put out. The reality is that the banks have indulged in reckless lending for many years and the easy availability of credit has inflated the property market. Anybody who is considering buying a house at the present should demand a huge discount or an indemnity from the agent to cover any losses.
- David Payne, London W4
If Richard Ellis is really forecasting price rises of 6% across London next year, is he willing to put his money where his mouth is.
I am willing to bet hard money that it will be less. You've got my email address. Show us you really mean it - it'll make a great story too.
- Harry E, London
House prices will rise next year - I've just took a £60 billion punt on it. Well you taxpayers have anyway.
- Gordon Brown, Scotland
Too late to try and talk the market up!
The prices are already crashing and were already on their way down in the Summer.
By the time Easter is here the market will be in free-fall.
- Flopsy, London
These are no experts. They are people with an interest in prices rising or stabilising. They are talking nonsense. Prices have already crashed between five and nine percent in some areas. How can that possibly mean they will level out? This is pure fantasy. No amount of spin by them will stop a necessary and acute correction.
- Leonard Young, Pevensey
Laughable. Like today's CPI inflation figure of 2.1%.
The goodship Property Boom is sinking and they're trying to save it by bailing water out with a thimble.
Forget 3% - more like 30% falls in house prices. And that's conservative.
- Cp, London, UK
I hardly call a 10% price correction a crash. Anyway, if you are careless enough to buy a property you can't afford, you get what you deserve! Unless people are forced into selling, most will sit tight and ride out the rough patches...only time will tell!
- Clare, London
First VIs said this is a small island so prices cannot fall at all, and they did. Then VIs said prices could not fall in cities owing to planning restrictions, and they did. Then VIs said prices could not fall in London because it was the world centre, planning restrictions, no land, booming economy, but they did. Now they will say it cannot happen to housing (only flats), but it will.
Unemployment and interest rates are lower in the US than here. In Japan rates went up by less and unemployment was lower and look what happened there from 1990 to 2005. Prices have just fallen in Manhattan and did so for years in Tokyo (much less land). Our unemployment rate went up after house prices fell last time, so this optimistic mantra based on nothing is scary.
Salaries and rents have not kept up with house prices since at least 2002. The last 5 years have therefore required larger income multiples and lower deposits to drive these Ponzi scheme prices ever higher. This limit was reached in London even before the crunch. How can prices go up if no one can get the money (read as artificially low-priced debt)?
Once that is the case there are 1m BLTs with many subsidising their tenants. No capital appreciation is a good trigger for a crash. De-leveraging and vicious cycle begins. Will this really be the first ever bubble that burst without bursting?
- Raj, London
This 'forecast' by 'expert' 'insiders' bears no relation to any of the actual news coming out at the moment regarding falling house prices, or the economy in general. The 6.8% falls in London last month show the housing bubble is deflating as fast as it inflated. Don't believe those with vested interests, folks!
- David Ball, Islington, London
Extra, Extra ... Estate Agents in denial about rapidly falling house prices (even though the crash is already well under way). What a surprise. What do you expect them to say?
- Steve M, London, England
Prices are twice as high now vs wages as they were at the peak in the 80s. This means prices can drop 50% and houses will still be more expensive than just before the last crash.
And don't forget how percentages work... a 50% drop is bigger than a 50% rise. If a £100k house rises by 50%, is now worth £150k. If it then drops by 50% it's only worth £75k.
- Nathan Hobbs, Luton, UK
Given that the government is prepared to bail out the banks, the financial service community now have a "reason" to feel safe in continuing dishing out ridiculous bonuses for one-more year - propping up the housing market for... a few months.
- Andrew, London
House prices are going to crash all across the UK, especially in London. People cannot now get the mortgages that they wish to and the buy-to-let brigade are now subsidising their "investments" each month to meet the mortgage payments as well as sitting on a depreciating asset.
Do not be fooled by the estate agents "all" predicting rises and be silly enough to buy at the moment. Wait 3 months and see! Worst case you'll waste 0.5% - best case you'll save hundreds of thousands of pounds.
Prices fell in London nearly 7% last month - how will this trend be stopped in time for rises next year? Madness.
- Barry, London
I wish I was convinced that... "the economic fundamentals remain sound".
I'm afraid forecasting 6% rises in London is pushing the bounds of professional optimism to the limits. Of course I will happily stand corrected this time next year.
- Andy Gregory, London, UK
The experts all happen to be estate agents. What a surprise - they say prices will rise. Prices are set to crash in London, and no amount of denial will prevent this.
- Tomo, London UK
Seeing as London prices are falling by as much as 10% in one month [Hackney] and 6.8% on average, the outlook for flat prices is quite some turnaround in the fortunes of the current market!
- Jason Turner, Bermondsey, London
It's a shame you didn't ask the opinion of some reputable city economists as most are now predicting falls of up to 10% next year.
- Jim, London, UK
I have never seen house prices remain stable. House prices are part of a 20 year cycle as they go up and then come down. Properties in London are very overvalued and all the poor economic conditions combined suggest we are going to have prices drop well into next year. Only yesterday Rightmove said there were falls of 6.8% in asking prices in London this month. Together with the collapse of the buy to let market, the waters look very choppy for house prices.
- Gavin, London
I draw one glaring conclusion from this article, I still don't trust anything estate agents say, in fact I believe the opposite. Of particular interest are Lulu's comments that appear to suggest that we are through the worst of the "credit crisis". I would be of the opinion that we are still at the beginning.
- Steve, London
Since all the pundits are estate agents, buyers can disregard this attempt to offset the damages done by yesterday's report showing 6.8% price drop in London.
Prices are coming down, don't buy a flat now!
- John, London, UK
The reality is that prices have fallen in London and there is no reason why that trend will not continue.
- Peter Buttery, London EC1
