HOUSE PRICE RISES FALLING AWAY

Although its report claims house prices were rising in October - by a "surprisingly strong" 1.1%, and by 9.7% over the past year to an average £186,044 - Nationwide BS thinks buy-to-let investors face certain losses for several years until rents eventually manage to rise "very strongly relative to house prices".

But Nationwide thinks an early-1990s style crash remains unlikely, because unemployment and interest rates won't rise suddenly as they did then.

It also thinks investors buying today will see "relatively healthy returns" if they hold properties for 10-15 years ahead.

Says Nationwide: "Unless interest rates fall back to the lows of 2003, house prices will need to rise at a slower pace than earnings over the medium-term in order to bring housing affordability back to historical norms."

Says Nationwide chief economist Fionnuala Earley: "The rate of growth in house prices is clearly weakening, and we may see small falls in some months, as we did in February. But we see nothing to produce widespread and sustained falls.

"Different factors could be driving the low level of instructions, including a reluctance to trade up amid current uncertainties and the fact that low unemployment is limiting the number of forced sales."

Meanwhile, a new analysis from Hometrack, the leading housing market data agency, predicts housing market turnover in 2008 - 1.17m sales - will be barely half the 2m sales seen in the late 1980s. Hometrack says 2009 will be only slightly busier, at 1.21m sales.

"The overall result is that the stock of unsold homes is still relatively low, and this provides some residual support to prices", it says.

However, Nationwide agrees with other commentators in its price predictions for 2008.

It says house prices next year will be "broadly flat". Leading London and country agents. Knight Frank predict a 3% rise in 2008, while Hometrack predicts annual rises will have fallen away to 1% by December 2008.

Says Hometrack Director of Research Richard Donnell: "Transaction volumes are expected to fall by 17% over the next year. The next 12-18 months will be characterised by a general lack of housing for sale which will provide a support to pricing, although this will result in much greater price volatility within local markets."

Hometrack says large price falls will be averted because the great majority of households don't have to sell. Only a quarter of sales each year are by households who have to sell - probably not enough to drive prices down sharply.

But Hometrack predicts that arrears and losses in the adverse credit market (leading to County Court Judgements and arrears histories) will be much higher than expected.

Lenders fighting for business in a smaller market - gross lending will fall from £359bn in 2007 to £319bn in 2008 - may need to achieve wider margins to maintain profit levels, leaving vulnerable consumers exposed to greater risk of serious arrears and repossessions.

Forecasts for house prices in 2008 include:

:: Knight Frank, London and country house agent: prices up 3%

:: Savills, London and country house agent: 3% overall, but only 0.5% in North East, North-West, Yorkshire and Humberside.

:: Hometrack: up 1%

:: Council of Mortgage Lenders (CML): 0%

:: Capital Economics, a private sector consultancy: minus 3%

:: Nationwide BS: "Expects market to slow", but no specific figure yet.

:: HOME INSPECTORS HIT BY SHORTAGE OF INSTRUCTIONS

It is now possible that controversial Home Information Packs (HIPs), introduced by Government to speed up the buying and selling of homes, may not be extended to cover all homes for sale until April 2008 at the earliest.

At the moment, HIPs are required by vendors of homes with three bedrooms and more - and that's not generating anything like enough work for thousands of Home Inspectors and Domestic Energy Assessors (DEAs) who may have spent thousands of pounds getting their qualifications.

Their dismay surfaced at a conference of The Association of Home Information Pack Providers (AHIPP), claims the current edition of Negotiator, the estate agents' magazine, when a Government spokesman sent by Housing Minister Yvette Cooper to address the conference was "lucky to have got out alive" when he suggested Government would only extend HIPs to the entire housing market when sales levels had stabilised.

Henry Pryor, who established a website - www.theHIPexchange.com - to help vendors find the lowest prices for HIPs and Energy Performance Certificate (EPCs), says: "After attending the AHIPP conference, I am ready to believe that barely 25,000 HIPs have been prepared so far. That's a tiny fraction of more than 100,000 homes currently on the market that should have required a HIP.

"Inspectors are slashing prices to get work. The price of an EPC has dropped from an initial £120 to £70- 80, while the full HIP which started at £350-plus is now readily available from £250."

The obvious way for vendors to avoid the expense of a HIP on a home for sale is to say it was previously on sale with another agent before August 1, when HIPs were initially required for homes with four bedrooms and more.

Pryor says the next key date for HIPs is January 1 when all homes with three or more bedrooms should legally require a completed HIP before they go on sale.

However, Pryor thinks estate agents will only insist on HIPs when Trading Standards Officers, consumer watchdogs employed by town halls, begin to prosecute agents for marketing homes without HIPs.

Pryor thinks the concept of HIPs may have been "holed beneath the waterline" when solicitors acting for buyers, and lenders, refused to accept HIPs as security for a loan. If buyers have to arrange another survey/valuation to satisfy lenders, HIPs become largely irrelevant to both sides of a property sale.

Says Pryor: "If you go online, you see few properties listed with a HIP or an EPC. Unlike the smoking and hunting bans, this is one Government reform quietly dying from lack of interest."

Trevor Kent, the maverick Gerrards Cross, Buckinghamshire estate agent who has consistently campaigned against HIPs: says "I am beginning to believe the Government backed HIPs as a way of supporting the market when it hit rough weather.

"There is now 30% fewer homes coming on sale, which is helping to keep prices firmer than they would otherwise have been. Few of my properties have HIPs, because few owners of homes with three bedrooms and more are coming to me to put their homes on sale."

:: INFORMATION: Further details of HIPs and EPCs available www.theHIPexchange.com.

:: WILL NEW HOMES QUANGO SOLVE HOUSING PROBLEMS?

The promise of another three million new homes by 2020 - unveiled in the Queen's Speech to tackle the housing crisis - hasn't gone down entirely favourably with some eminent figures in the property industry.

To meet rising demand for housing from people living alone and immigrants arriving in Britain, the Prime Minister proposes a new Homes and Community Agency to deliver more social and affordable housing and to promote regeneration of urban areas so that the majority of new homes are built on "brown land" which has been built on before.

One set of quangos did succeed in the private housing sector: the Urban Development Corporations of the 1980s, starting with London Docklands, which drove regeneration forward in the main cities when local authorities seemed unable to tackle the job themselves.

Since then, quangos galore and thousands of civil servants shuffling papers have dabbled in housing - to limited effect. What chance this time?

Says David Bexon at SmartNew Homes.com: "I am concerned this new body will have little impact on the increased level of housing our country so desperately needs. What we really need now is immediate steps to make a real difference.

"Without immediate action and a surge in new homes, the Government seriously runs the risk of a national housing disaster."

Pierre Williams at Inside Track, which runs training courses for would-be Buy-to-Let investors, says: "Gordon Brown has promised massive increases in housing supply since 2001. We have actually seen a massive increase in delivery bodies, notably in the Thames Gateway where there are dozens of them, but collectively all these people have not increased supply.

"The likelihood is that this new proposal will simply create another tier of bureaucracy."

David Titmuss, managing director of The Mortgage Lender, a broker shifting about £550m of new home loans nationwide each year, has another concern.

"I definitely support new housebuilding", he says, "But it shouldn't be allowed to produce too many homes in certain localities which impact on housing values in the surrounding area. Many of that generation now in its 30s and 40s have a great deal of equity which they may need in retirement, and they would be severely disadvantaged if values were to fall."