Estate agents reject price prediction

Jan 2 2008 by Hannah Jones, Western Mail

CLAIMS that average house prices in Wales could drop by 10% before next Christmas are misleading, estate agents said yesterday.

Analysts at accountants Grant Thornton claim that up to £20,000 could be wiped off the average value of a home during the coming months, meaning that house prices could end 10% below the peak they reached in August last year.

A fall of this level would wipe around £400bn off the nation’s wealth held in bricks and mortar, while it would also deliver a huge blow to consumer confidence and potentially also to the wider economy.

But the general consensus from industry insiders in Wales is that the market, which slowed down significantly in the second half of 2007, will be flat for some of this year. But they predict some price increases, however small.

John Francis in Carmarthen and Knight Frank in Cardiff claim there will be a 1% to 3% rise, while Cardiff’s Thomas George is estimating a 3% to 4% rise.

The County Homesearch Company, the largest independent network of homefinders in the UK, says house prices, in West Wales particularly, would grow by 5% this year.

But, according to Maurice Fitzpatrick, a senior tax partner at Grant Thornton, houses have hit their peak.

“We can expect a fall of 3% by the end of 2007, followed by a further fall of 7% in 2008,” he said.

“This would wipe £400bn off the value of UK residential property or an average of £20,000 per household. A ‘burn off’ of this degree of personal wealth would tend to make people more cautious about borrowing. That would damage any feel-good factor and, potentially, economic growth.”

Nick Davies, who runs his own eponymous agency in Talbot Green, says the Welsh property market is not in danger of crashing and that he would “challenge” the set of figures which suggests a downturn in prices.

Mr Davies, a former spokesman for the Association of Estates Agents in Wales, said he doubted the findings of the “doom and gloom agents”.

“People are gaining more confidence in the market,” he added. “There are lots of reasons why the property market was quiet in 2007, many factors to consider such as interest hikes, the introduction of home information packs (Hips), the uncertainty in the market place following Northern Rock’s troubles.

“But there is confidence out there, and I think we will see some price rises.”

Nigel Jones, director of John Francis estate agents in Carmarthen, also believes that the market remains strong at home.

“2007 was a good year to buy and sell property,” he said.

“We’ve had relatively limited growth in prices and there have been more properties on the market so there has been more choice.

“But it still needs a bit more vendor realism in terms of price expectation. A realistic price has a good chance of selling quickly at that price. If it is too ambitious, it won’t.

“What is often wrongly assumed is that a drop in property price reflects a drop in the value of a home, but it doesn’t necessarily mean that. Rather, it shows the value might not have been realistic in the first place.”

But economics group Capital Economics is pessimistic about the outlook for the housing market during 2008.

The group had originally forecast that prices would fall by 3% this year and next year, but it has since increased this to a drop of 5% in 2008 and 8% in 2009, which would wipe out all of the increases seen during the past 18 months.

But the majority of commentators are expecting house prices to stagnate during 2008 but not to fall.

Britain’s biggest mortgage lenders Halifax and Nationwide both expect 0% growth, while the Council of Mortgage Lenders and property website Hometrack expect them to edge ahead by 1%.