THE GREAT EASTER PROPERTY SALE

"To do it in blanket fashion is a bit cynical. Were all these properties previously over-priced?

"Or might it mean a little old lady getting pressurised into coming down £10,000 when she might have been able to get her original price anyway when the Springtime buyers came along.

"The problem with all-round price cuts like these is that they help the agent more than the vendor. Vendors might easily end up £10,000 out of pocket while agents lose a few hundred pounds on commission, and have the satisfaction of turning over their stock again."

Says Henry Pryor at the property website Primelocation.com: "Price reductions on this scale suggest dozens of properties have gone on sale at unrealistically high prices.

"It may also be an exercise to help agents refresh their stock: if after three or four months, vendors won't take a price cut, agents might be tempted to strike them off their books to save further expense, including advertising.

"In a falling market, as we are now, agents have to price ahead for buyers to take the figure seriously. This sort of move suggests agents are treating homes like a commodity, which might not go down well with all clients."

Pryor analysed a sample of 300 homes which went on sale on his websites last September - and found 50% have so far failed to sell.

"Anecdotal" evidence, he says, suggests about 120,000 homes a month were going on sale last August. By January 2008, that was down to 75,000-80,000.

However, Pryor says the big lesson of Reeds Rains cuts is that buyers must always focus on getting prices down instead of being fobbed off, on new homes at least, by Stamp Duty paid, free Home Information Packs (HIPs), or luxury kitchen 'white' goods included.

"A £8,000 price cut is worth £16,000 in repayments over a 25 year mortgage", he says, "That's worth much more than the perks which developers might throw into negotiations."

SUPPLY OF NEW HOMES SWITCHES BACK TO HOUSES

Although a big increase in new home building up to 2020 was an early pledge of Gordon Brown's Premiership, his bold plans may be hit by the sharp downturn in housing market prospects.

The Government wanted an increase in supply to produce 240,000 new homes a year up to 2016. Actual output is well below than level.

Latest figures from the National House-Building Council (NHBC) reveal 186,505 new homes completed by NHBC-registered builders in the UK in 2007 - just 1% up on 2006.

Of that total, just over 157,500 were in the private sector for open market sale, with the rest (28,700) going to housing associations, for sale or rental, in the role which local councils occupied until the 1980s. The housing association total is 13% up on 2006.

NHBC statistics also show that the proportion of new homes selling for over £150,000 rose from 71% in 2006 to 74% in 2007, pushing the 'ability to buy' index of first time buyers to its lowest-ever level in quarter three 2007.

The index is based on a formula which takes into account the average cost of homes bought by first time buyers, average income and mortgage interest rates.

There is little hope output can be significantly boosted in the immediate future.

Says NHBC Chief Executive Imtiaz Farookhi: "Currently, key market indicators, such as ability to buy, reservations and mortgage approvals, show a downward trend."

NHBC figures show the average number of homes sold daily in 2007 was 572 against 600 in 2006. There is real danger the figure will go lower in 2008, after a difficult January and February.

Richard Donnell, director of research at the property website Hometrack.co.uk, thinks the new homes market began to go out of kilter in 1998, when a surge of investors persuaded planners to back high density 'brownfield' developments on land built on before in towns and cities.

In 1998, flats accounted for 15% of new home starts. Now it's nearly 50%, just as investors draw in their horns as prices stall.

Says Donnell: "The fear is that speculative investor demand for new housing has resulted in pricing levels in some sectors of the new build market becoming detached from the pricing of the local residential market."

House prices have tended to stay more sensible, says Donnell's analysis, because most buyers are owner-occupiers.

Donnell says developers are using incentives widely to support price levels, and to reassure banks which loaned money to build new homes. Lenders are so concerned that some seek 'greater transparency' on incentives.

Some are changing lending policies on new build, typically reducing the maximum loan-to-value (LTV) which borrowers can take.

As prospects worsen, Donnell says "the only option left to developers is to cut volumes in an effort to support pricing levels and margins."

In the medium term, the supply of new homes depends on three factors: how quickly developers react to changing markets; how landowners react to falling land values; and the reaction of local and national Government in terms of planning policy for new housing.

If prices fall, landowners are likely to sit on their land. That will be one headache for builders, and another will be rising costs of production as Government demands more energy efficient and sustainable homes.

Some developers have already started to re-focus operations, by cutting the number of flats being started. This trend "puts natural downward pressure on housing volumes for the foreseeable future", says Richard Donnell.

Hometrack says the winners among builders from now on will be those which "adapt most rapidly to the changing nature of demand."

BAD NEIGHBOURHOODS MIGHT STRUGGLE TO 'COME BACK'

Young homebuyers often choose a cheap home in a rundown part of town- hoping that "what goes down must eventually come back up."

Don't bet on it. A new report from the Joseph Rowntree Foundation (JRF) questions this theory, on the basis of a detailed study of areas constructed in the 1920s and 1930s within a 'planned community' in the Scottish town of Stirling.

JRF says a neighbourhood's status is "often associated with historic male employment patterns".

In this case, three separate estates areas were shaped by previous male employment patterns: mining and labouring, skilled trades and professionals. And "it is still social class that fixes the dominant social identity of a neighbourhood."

Says Douglas Robertson, the JRF report's lead author: "How communites are planned, then established, sets a physical and social template that has a long and sustained impact on neighbourhood identities.

"This study has shown how place identity can act against the stated ambitions of renewal projects and cause social segregation."

The report also warns: "External perceptions of a neighbourhood's identity were often stronger and more of a caricature than those held by the people who lived there."

Women are seen as having a "core role" in sustaining community spirit. But with more women working, this role in binding communities together is increasingly lost.

The report also thinks Right to Buy could have sharpened social segregation between two original council estates: one largely sold off to private owners has gained an 'aspirant' label whereas no 'relabelling' has taken place on estates largely remaining in public ownership.

The JRF study also found different attitudes in areas dominated by Catholics and members of the Church of Scotland - but religion does "not emerge as a key marker of identity and difference."

Further south, it might be argued, the division between different areas of housing might be less pronounced, because more private money might be available to restore the more attractive features of older buildings in areas which have fallen on difficult times.

INFORMATION: Neighbourhood Identity: People, time and place is available as a free download from www.jrf.org.uk.

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