Henry Pryor Says: Deja Vu?

Search: Latest house price figures

Well, that's another twelve months over. 2007 was memorable for many reasons, but for property it was when the ten year bull market came to an end.

If you bought a house in 1997, in many cases it's now worth nearly four time that today. There were big winners in 2007 (John Hunt, who sold Foxtons estate agents for a reported £370m) but we will have to wait and see who the big losers will be as I think we will need to be patient before anyone who bought this year decides to sell. When they do, I'm afraid that many will face a loss.

I was asked this morning by Sky News what I thought of the RICS predictions for the housing market for next year. RICS warns that the market won't be easy but that house prices will only be down 1% come Christmas '08. Interestingly, this view is shared by The Council of Mortgage Lenders who also gave us their predictions along similar lines. I'm afraid that I was not so bullish. HSBC have said they think the market will drop by 30% over the next 3 years. I think that next year alone a lot of homes will be worth 30% less than they thought they were last summer! The reason is painful but straight forward.

Buyers are afraid to commit today in case they can pay less tomorrow. So, to tempt them to buy today, they need to feel confident that they are not paying too much. For exampole, a house that was put on the market in July (to beat the introduction of HiPs) for £1million, but that hasn't yet found a buyer is in a sticky position, if it has to be sold.

Imagine that you liked the house and had the money to buy it - a big ask, I know, but assume you did. How much would you bid? Don't be harsh, remember that you would be happy living there and you can afford it. The simple truth is that most people would probably make an offer somewhere around £800k. That's 20% off already! And I expect that yours would be the only bid and that if you dug your feet in, you might get it for even less.

RICS surveyors reckon that they can accurately value to within 10% of the price of a home. I find the idea that they predict a 1% fall in the next 12 months hard to swallow as a result.

If you want to know what the man in the street thinks, then Spread betting firms are indicating a drop of around 15% on the Halifax house price index in 12 months time. These are real people risking real money and not surveyors and mortgage lenders trying to suggest that the cup is half full for the sake of their business. Who do you believe?

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