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Property transactions on course to halve this year

15 October 2008
Written by rosalind renshaw

Property prices will continue to fall into next year but transactions should pick up slightly, a leading London agent has predicted.

Lee Watts, managing director of Kinleigh Folkard & Hayward, is the first in the industry to provide a forecast, released yesterday just before a Newsnight special on the housing market was screened.

In the programme, economist Roger Bootle predicted that house prices would fall 30-40% from their peak, and that the mortgage crisis would be so severe that it would “be like a war”.

Estate agent John Horton said it was the worst market he had ever known, while Charles Peerless, director of Winkworth, agreed with property developer Gary McCausland who called for a 1% cut in interest rates next month, for Stamp Duty thresholds to start at £250,000 and for Home Information Packs to be scrapped.

McCausland said the issue was not controlling inflation but avoiding recession.

Meanwhile, Lee Watts at KFH said earlier that property transactions for this year would end up at about 600,000 – half of last year’s total – and that property prices had already fallen hard.

He said: “Based on our experience across the London market place, property selling prices today are in excess of 20% less than at their peak in the spring / early summer of 2007. Some institutions and commentators have announced falls of between nine and 12%, but I would say that based on London alone, these figures are wildly inaccurate.

“To illustrate, our exchange results for last month reflect that average selling prices in London were over 14% less than asking prices, and asking prices have already come down by 10% over the last year.

 “I believe property values will reduce by a further 4–5% and we will see this adjustment achieved by early 2009, with very little further movement in values during the remainder of that year and through 2010.

 “People will always need to move, and as we progress into 2009, I predict we will see a change in the supply and demand ratio for property, albeit slowly, with increasing levels of activity and transactions as the year progresses.

 “In 2009, I suggest we will see a 15% increase in UK sales transactions compared with 2008. Based on my forecast that there will be 600,000 sales transactions in 2008, a total of 690,000 transactions in 2009 – still 44% less than in 2007.”

Watts’ comments follow the latest bad news on the housing market. The RICS reported that its members are now selling less than a property a week, while the Council of Mortgage Lenders said that both the number and value of home loans in August were the lowest it had recorded.

In August there were 42,200 house purchase loans, 15,600 of them to first-time buyers, and 26,600 to home movers, down 61% in volume from August last year.

Comments

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    The mentality of buyers must change. Buyers have in the last 20 years purchased property based primarily on how much they are likely to make on it when they sell and as a means to suppliment their income. This clearly has ended. Buyers should instead buy a property if they feel it represents good value and will provide a nice home. Their income will come from their employment. If, when they sell they make a few quid then even better!

    • 15 October 2008 05:59 AM
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    Despite all the gloomy figures that are undoubtedly factual, isn't it about time that some positive remarks were made about the future of the property market. It appears that the media and, in particular, the BBC are intent on reporting only suggestions of a downturn in this and a crisis in that. Any good news worth reporting seems to be positively swept under the carpet. This continuous mountain of negative coverage has only helped to stop the property market in its tracks by taking away any glimmer of confidence the man or woman in the street once had. Perhaps a bit of optimism might reverse some of our current fortunes?

    • 15 October 2008 03:21 AM
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    James White: - there will always be a need for a traditional High Street Estate Agent. Online marketing should only be regarded as an additional marketing tool. It is certainly not the be all, end all business model.

    • 15 October 2008 12:25 PM
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    Absent from this discussion thus far has been the impact on the high street estate agency model. It seems to me overwhelmingly likely that the whole industry is going to have to move to more of an online - BrightSale - style model in order to survive this downturn. Personally I look forward to it. Estate agency hasn't changed in one hundred years and the more quickly it is brought into the C21st the better! This downturn ought to do the trick.

    • 15 October 2008 11:55 AM
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    20% or thereabouts in price drops on EXCHANGED properties on 2007 levels which is the important thing. Forget what properties are being listed at, because even if they are keenly priced, buyers' will still drop them upto another 10% or walk away. In my local area, agents are still taking on properties to let them sit on the market, I'd rather take one a week I can sell than 5 or 6 I can't.

    • 15 October 2008 11:28 AM
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    I have to agree with Lee Watts of KFH. In Surrey & South London we have already experienced price drops of 20% to 30% from our peak in the Spring of 2007.

    • 15 October 2008 11:18 AM
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    Roger Bootle's prediction is clearly wrong. The peak to bottom drop will be 50-60%

    • 15 October 2008 11:14 AM
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