CHRISTMAS BARGAINS FOR HOME BUYERS

So far as any surviving investors are concerned, David Bexon says: "Developers are guaranteeing rental yields on top of other upfront incentives. Part exchange can also be used to speed up the buying and selling process, especially in a quiet market.

The website says mortgage subsidies - worth £1,000 per month until April 2009 in Tunbridge Wells, Kent - are becoming increasingly common in southern England. In the West Midlands, affordable housing is selling at 20% below open market value, it claims.

Some big builders appear to have been stunned by the speed of the slowdown: Crest admits a 15% plunge in sales in the autumn, while Bellway indicates it will look at kick-starting sales again sometime in the New Year.

A report in Estates Gazette, a trade magazine, says builders are sharply divided - between pessimists and optimists - in their reading of 2008. It quotes one agent saying that some prices are being trimmed by up to 20% by builders keen to shrink stock before the New Year.

Some idea of the pressure on builders - who have shareholders to keep happy - can be gleaned from November's Housing Market Report (HMR) from the Home Builders Federation (HBF).

HBF director John Stewart says in the report that net new home prices fell in October and that builders made significantly greater use of sales incentives from then onwards. Net reservations showed a marked fall in October - but the HMR says the industry is "optimistic" more new homes will sell in 2008 than 2007.

Stewart highlights a forecast from Experian Business Strategies that new home prices, by rising only 1.2% between December 2007 and mid-2009, will show the lowest annual increase since the mid-1990s.

It predicts price falls in East and West Midlands, East, South East, South West and Northern Ireland - balanced probably by rises of 6% in London and 7.7% in Scotland.

Trevor Kent, a Gerrards Cross, Buckinghamshire agent acting for a few builders in the Thames Valley, says: "Builders are genuinely upset at what is happened.

"Many have bought expensive land and made plans on the assumption that Buy-to-Let investors would remain a significant part of their market, and suddenly they have to rely almost entirely on residential occupiers bringing a lot more hassle to their purchases.

"In the boom years, many builders almost forgot about dealing with buyers stuck in lengthy chains."

Says Kent: "The message from nearly all the builders is just 'Come and talk to us. We don't care what you say, but we promise to listen'.

"The fact is that investors are almost entirely gone from the market, because they can't get funding at a realistic price, and without prospects of a early capital gains, they are likely to be showing a loss at current prices."

However, it seems that buyers can't get everything their own way. SmartNew Homes.com says the average new home price at £258,760 showed a slight month-on-month rise, and penthouses are in sufficiently short supply to have enjoyed a 2.7% price rise in the last four weeks to an average £438,818.

:: Economics consultancy Capital Economics says the seven largest quoted housebuilders have seen their share prices plunge an average 45% in the last six months.

"Falls on that scale and that time horizon have only previously been seen three times in the past 40 years," it says, "and falling house prices were a common link between those episodes."

Capital Economics says its current forecast of 3% falls in new home prices in 2008 could well be exceeded, bearing in mind recent steep falls in mortgage demand.

:: NORTHERN ROCK TRIGGERED SALES COLLAPSE

Fallout from the collapse of Northern Rock caused as many as 60% of agreed property sales in London fall through, according to Hamptons International, a leading agency in the capital and Southern England.

Its 2008 Forecast claims that market changed drastically during the third quarter of 2007, as fears triggered by the credit crunch brought the market to a "veritable standstill".

Says Hamptons: This was particularly the case in London, which saw over 60% of agreed transactions fall through in September, as a result of 'down valuations' by surveyors, 'chipped bids', or buyers simply deciding not to proceed.

However, Hamptons believes the London market will "settle down" to show house price growth of 3%-4% in 2008 - with Paddington, Bayswater, Kings Cross and Islington likely to see the greatest capital appreciation, given the continuing regeneration of Paddington Waterside and the Kings Cross area.

In Southern and Western England, Hamptons predicts a 2008 rise of 2.5% - with strongest investment potential likely to be found in the region of Ashford, Middlesex, Dorking and Horsham down to the South Coast.

Hamptons general message is that "gloom and doom" is currently overdone in most speculation.

"For buyers, there should be a greater selection of properties available than we have seen for some time," it says.

"For vendors, there are still more buyers than properties for sale, and if a property is realistically priced, it should certainly sell without too much trouble."

:: STUDENT RENTS MAY STILL BECKON INVESTORS

Because the provision of student accommodation in major towns and cities is increasingly left to the private sector, professional investors can rely on such steady inflow that their property could be paid off within 20 years, claims Assetz, the specialist property investment firm.

Stuart Law, Assetz chief executive, says: "Student property is one of the most lucrative investment opportunities in the current market.

"Student numbers have significantly increased over recent years, yet most university campuses are not able to keep up with demand.

"There is a huge increase in demand for privately-owned student accommodation, with top student towns offering a near guaranteed and fast-growing rental income and a constant and growing supply of potential tenants."

Assetz claims that student property is showing gross yields of 6%-7.5% on purchase price, with "many investments cash positive in the first year, once all management costs and mortgage costs have been deducted".

Assetz cites the case of a newly-built student unit with five bedrooms in Sheffield, selling from £270,000 and bought on a mortgage of £255,000.

After 10 years, the property is earning £27,800 a year, and could conceivably be worth £489,320 - if price rises seen in recent years are maintained.

The outstanding mortgage is still £255,340 - but an investor by then will show a small annual profit of £6,300, and possibly hold £234,000 worth of equity in the building.

On a refurbished house costing £225,000 in Manchester, with four bedrooms, annual net income rises from £1,868 in year one to £9,000 in year 10 - and by then the owner could hold equity worth £175,000, alongside an unchanged mortgage of £191,250.

Both calculations assume buyers taking on the property with an 81% loan-to-value mortgage. Investors would always need other houses, or even a regular income elsewhere, because most of the gain projected is in the value of the property and would only be realised on eventual sale.

:: INFORMATION: Assetz for Investors (0845 400 9000 and www.assetz.co.uk/investors).

:: OVER-SIXTIES STORE UP HOUSING WEALTH FOR OLD AGE

Over-60 year olds currently hold £1.37 trillion worth of value in bricks and mortar - but by 2036, that value will have soared to over £2.21 trillion, says equity release specialist Sovereign Reversions.

Some 80% of over-60 year olds are living their own homes, well ahead of the 70% average for the UK overall. After deducting any remaining mortgage debt, the average equity held by homeowners of 60 and over is £265,000.

This money will become increasingly important to lifestyle, says Sovereign reversions, as pension provision in the private sector becomes poorer: final salary schemes are being consigned to history, while annuity rates are shrinking because of increased life expectancy.

The company predicts that by 2036, there will be 20.8 million people aged 60 and more, making up nearly a third of the total population; almost a quarter will be over 65.

Many of these people will find retirement brings growing financial pressures, says Sovereign - because final salary pensions are being widely demolished, and because increasing age dependency ratios make it harder for working families to support ageing relatives.

Sovereign, which recently acquired Hinton & Wild Home Plans, an equity release advisor established in 1976, currently holds 885 homes worth £100 million-plus at vacant value in its equity release portfolio. This value is unleashed when homeowners who have taken equity release deals die or move into care.

According to Graham Barlow, at Just Retirement, another equity release specialist, homeowners increasingly look to supplement pension income with lump sum or regular tops-ups from the value of bricks and mortar.

Just Retirement's minimum lump sum drawdown is £10,000, but many homeowners prefer the monthly drawdown option from £50 per month.

Says Barlow: "Equity release provides best value for homeowners if house prices keep rising by 5.5%-6% per year until death.

"At current interest rates, the value of a lump sum advance which will be eventually charged against the estate of the homeowner on death, roughly doubles every 10 years."

INFORMATION: Sovereign Reversions (01234 356 300); Just Retirement equity release plans are provided through independent financial advisors (IFAs).