HOMEOWNERS WIN AS RENTS CONTINUE TO RISE

"In recent days, we have seen a further slump in mortgage approvals, while the mortgage credit squeeze shows no signs of easing," she says.

"Overall, the balance of evidence points to further sharp falls in house prices in the months ahead."

:: SELLERS MIGHT ACCEPT A BIG 'HIT' TO GET OUT

With transactions in the housing market set to hit levels not seen since the 1970s, a new survey claims that owners have to accept a fall of nearly 10% in their asking price to secure a sale.

Hometrack, the Housing Intelligence Business, says house prices fell for the ninth month in a row during June and by 2.5% over the first half of 2008, to record a drop over the year of 3.2%. A slightly worse figure of 3.5% was recorded in September 2005.

Hometrack Director Richard Donnell says: "The drop in volumes was always possible as around half of all transactions in recent years have been driven by aspirational or non-needs based movers now sitting on their hands."

Hometrack also estimates the supply of homes for sale on agents' books grew by 1.4% during June, combined to an average monthly increase of 5% over the last four months.

The proportion of asking prices being achieved slipped during June from 92.3% to 91.6%, and is now at the lowest level since the survey started in 2001. A year ago, the proportion of asking price achieved was 95.6%.

Is there a danger of vendors adding 10% to asking prices - so they can swiftly drop the price when offers come in?

"Many vendors don't have to sell, and many have a tendency to add a bit on to ensure that they can accept a bigger hit," Donnell says.

"Anything to make buyers think they are getting a bargain is obviously useful.

"More worrying is the drop in transactions volume to levels of the Seventies. What does that mean for consumer spending, and how important will housing become to the general health of the economy?"

Hometrack says the regions seeing the largest price falls in June, of 1% and more, were mainly those at the forefront of the boom until a year ago. They include Greater London, the South-East and South-West, along with East Midlands.

However Henry Pryor at Primemove.com, a property aggregator bringing together over 1m homes for sale from major portals, argues that in many cases, sellers accept little more than 85% of the asking price if they are determined to get a deal.

"Somebody has to bridge the gap when lenders who were ready to lend 85-90% of price a year ago have in many cases cut this back to 80%," he says.

"You get some idea of the real price gap when you compare prices which developers advertise on new homes, and prices which owners have to accept when they try to resell. These owners can't match perks which developers provide like stamp duty paid and no deposit required.

"The market is still trying to find the bottom. Nobody really knows where true values are, and probably won't for months to come."

:: ARE LANDLORDS MOVING BACK INTO THE MARKET?

In autumn 2007 the Building Societies Association commissioned a MORI survey to ask landlords why they were investing in bricks and mortar - despite surveys suggesting at the time that house prices could be overvalued by 20%.

MORI found that if prices fell suddenly by 15%, fewer than 2% would sell immediately. Over a fifth (21%) said they would look to buy more property.

Nine months later, the 15% fall - more or less - has duly happened. So will landlords be lured back into the market?

David Newness, Derby-based managing director of Your Move estate agents, boldly predicts that buy-to-let will grow this year.

"Opportunities to invest are ripe for professional landlords able to secure financing," he says.

"With rising tenant demand comes rising rents. Buy-to-let yields will consequently improve.

"House prices are under pressure at the moment, and there's scope for buy-to-let investors with collateral to get good deals to expand their portfolios."

But Jonathan Moore at specialist broker Mortgages for Business isn't entirely convinced.

"Rents are definitely up because fewer first-time buyers can afford to buy," he says.

"The problem is that there is less finance out there for would-be investors. C&G has just come up with a new rate of 8%.

"There is little money around below 6.5% and one of the biggest lenders - Mortgage Express - is channelling money through about 20 brokers to get tighter control on quality and volume of borrowers.

"Meanwhile many amateur landlords who bought new properties may soon need to remortgage, possibly at rates rising from 4.99% to 6.79% and with a lower valuation than they started with.

"Many will either have to put money of their on the table, or sell in a soft market. Without other properties to remortgage, they are in an awkward position."

Nick Blunt, also at Mortgages for Business, thinks landlords should work with brokers to use their money efficiently and consider various options including the possible sale of unprofitable properties, assessing the level of rents charged locally and the type of tenants they have, and evaluating prospects for adding to the portfolio.

"As prices decrease, investors with cash in the bank should look at the longer term value of the investment in bricks and mortar. Landlords currently have a fantastic opportunity to grab a bargain," Blunt says.

:: RENTAL DEMAND STAYS STRONG IN STUDENT TOWNS

Nick Leeming at www.propertyfinder.com says leading university towns are seeing strong demand for rental properties.

Twelve of the top 20 most popular places to look for property to buy in Britain in June were home to well-known universities.

"Among those looking to rent, this figure was even higher: 16 of the top 20 towns have universities."

Leeming says this is the peak time of year for buying homes in university towns.

"Landlords are looking for new properties and students are looking for somewhere to live. That has driven the sharp uptake, but both Cambridge and Oxford are economic powerhouses in their own right."

Propertyfinder.com says the following towns are top for buyer interest: Cambridge, Oxford, Eastbourne, Southampton, Watford, Lincoln, Bournemouth, Norwich, Cardiff and Exeter.

Its top 10 for renter interest are: Cambridge, Oxford, Lincoln, Southampton, Eastbourne, Cardiff, Bournemouth, Reading, Watford, Norwich.

:: BUILDERS SLASH BACK THEIR PLANS

The number of applications by builders to start new homes fell by more than 30% in three months from March to May.

Statistics from the National House-Building Council (NHBC) show there were just over 35,000 applications to start new homes from March to May 2008 - 38% down on the figure of nearly 55,000 recorded last year.

The biggest fall was in starts of homes for sale on the open market - down 44%. Starts of homes for sale and rent by housing associations fell only 14% during the same period.

Says NHBC Chief Executive Imtiaz Farookhi: "So far this year, there have been 58,000 homes started by the combined private and public sectors, down 34% on the 2007 figure of 89,254.

"While our figures reflect a slowdown on sites, registrations during the three months from March to May last year were particularly strong, which exaggerated the year-on-year percentage decrease in registrations."

From March to May, the average daily sale of new homes was 452, against 549 last year. There is little doubt that developers will do deals with buyers ready to proceed without delay in the coming months, as they battle to keep their sales figures up.

:: VENDORS READY TO ACCEPT LOWER PRICES AT AUCTIONS

With some residential auctions achieving a sales rate of barely 40%, auctions in the summer holiday period could have some attractive guide prices to attract the eye of anyone with spare cash.

The latest series of Countrywide Property Auctions includes four-bedroom terraced houses in Liverpool with guide prices from £55,000, and newish one-bedroom flats in the same city from £50,000 upwards.

A one-bedroom flat in Manchester's Hacienda apartments in Whitworth Street is guided at £105,000 - while a one-bedroom flat in Salford guided at just £50,000 is in a block which includes a swimming pool/whirlpool bath, sauna and table tennis room.

The same sale includes a two-bedroom flat in Pollard Street, Manchester guided at £90,000-plus and a two-bedroom flat in Foregate Street, Chester at £130,000-135,000, with allocated parking.

In its Leeds sale (July 18), a terraced house needing renovation in Halifax, West Yorkshire, is guided at £35,000-plus.

The London sale (July 22) includes a two-bedroom flat in Barnet, Hertfordshire, (£140,000-145,000) and a one-bedroom flat in Southampton (£100,000-105,000).

Bidders need to remember that prices are probably pitched low to attract an audience and eventual selling prices may well be higher.

But for long-term investors, and others who might enjoy a regular bolthole in the city that they and their family can enjoy for some years to come, these look good value - to bidders brave enough to buy at a difficult point in the market.

INFORMATION: Countrywide Property Auctions are in Manchester (July 17); Leeds (July 18); London (July 22); Birmingham (July 24); Bristol (July 25) and Llandudno (Aug 6).

Catalogue request line: 0906 666 2468 (calls charged at £1.50 per minute).

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