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So, 2007 turned out to be the peak of the market after all. I said in January that we might look back at the fourth quarter of 2006 as the peak, something that was pretty widely reported at the time - even by the FT.
Northern Rock was the straw that broke the housing markets' back. Buyers were already struggling to afford the huge salary multiples required to get their next mortgage and the run on one of the UK's largest mortgage banks precipitated the withdrawal of nearly 40% of mortgage products.
Sales had already dropped by 10-15% through the early summer and by 33% year-on-year for the all important first time buyers for houses up to £250,000 - all before the introduction of the controversial Home Information Packs in August.
In 2008, we can expect prices to slide further as the market struggles to find its bottom. Buyers are already offering between 5 and 10% below asking prices and vendors and their agents are struggling to decide how to pitch their guide prices as a result. Do they factor in the apparent drop and look credible or price it expecting to get chipped?
In the last recession of 1989, prices fell by 50% by the time the market had adjusted in 1993. Repossessions next year could top 50,000 which in a market already staved of new property could represent over 7% of all sales.
Recent auctions have seen less than 75% of lots sold which means that even the traditional fire-sale option is going to be uncertain. Commercial property is also under pressure but I expect residential property to recover first.
Key milestones for the property market will be:
Monthly meetings of the MPC or Bank of England. Rates are expected to come down in the first quarter of the year which will be welcome but I expect to be too little, too late.
January - Repossession figures for 2007 from the CML which we should get in January. How bad was 2007? How many repossessions can we expect in 2008?
April sees the introduction of CEAR (Consumer and Estate Agent Redress Bill). All estate agents have to belong to a redress or Ombudsman scheme. More expense for more red tape for agents which no doubt will be passed onto the consumer.
Also in April, the change to Mr Darling's Capital Gains Tax rules. You will only pay 18% CGT on a property deal if you can find a gain to make!
June - The end of "First day marketing" in June. This is the date that the Government has set for all homes to have a HiP in place before they are allowed to be marketed.
This could mean a wait of six weeks while searches are done. What will this do for the market and for the sanity of both sellers and their agents?
August - EPC's for all rental properties in August. By law you will need an EPC for the property you let out. More red tape!
A 20% fall would put some places back where they were at the start of the year. I suspect that some will see values fall by as much as 40%. As always, there will be some winners with the main losers being those who bought in the last 12 months and many of the buy-to-let landlords with little experience of a downturn.
Panic will overcome them and predators will find easy pickings. Many of those who buy well in 2008 will emerge as the property guru's of the next boom.
