The housing debate

Apr 16 2008 By Kevan Carrick for The Journal

NEWS last week from the Halifax that house prices fell by 2.5% in March was hardly disastrous and certainly not unexpected, but it was the debate which followed it that I found really interesting.

I can’t recall a time when the so-called ‘experts’ on all sides of the residential property sector, in which I include housebuilders, were voicing such diverse opinions, with media commentary swinging between ‘a minor adjustment’ and ‘the biggest crash since the early 90s’.

Barely a day goes by without some report on the credit crunch, banks not handing on reduced interest rates to customers and warnings that one third of all estate agents may go to the wall within the next 12 months.

The truth, I feel, is somewhere between the proponents of the minor adjustment and those predicting disaster.

At some point, all booms come to an end, and the unprecedented rise in house prices the UK has enjoyed since 2000 was no exception.

After a year of stagnation in the housing market in 2007, it is only natural that prices will fall as sellers and buyers adjust to the changed circumstances of their economic situation. As the economy is also slowing down, levels of mortgage defaults and repossessions will also increase.

The welcome truth, however, is that a repeat of the 1990s is not on the horizon at the moment. Inflation is well within manageable parameters and interest rates are going down, not up. Nor are we in a recession, with growth of 1.8% predicted for this year by the IMF. That’s not as good as the government have hoped for, but it’s not a disaster either.

Most importantly, there is no need to panic. If you’re coming off a fixed rate mortgage, you will need to shop around and your monthly payments will go up, but there are still deals out there to be found, especially for those with equity over 10% of the value of their property.

If you’re selling, be realistic and remember that the value of the house you’re buying is also likely to have fallen in relation to the overall market. It’s a buyer’s market for those who’ve got the funds in place, so let the negotiations commence.

There is no hiding the fact that the tide has turned, but with a little thought and common sense, we should be able to ride the wave.

Kevan Carrick is head of JK Property Consultants LLP and policy spokesman for RICS North East.