Summer sale

House sales are falling, but before you panic heed Phil Spencer's advice

As far as the property market is concerned, it will come as no surprise to learn that this summer has been a total washout. The on-going uncertainty has weakened confidence and the last few months have seen a virtual stand-off between buyers and sellers. The net result is a continued fall in the number of transactions, which has gradually worsened through the summer.

Economically, we are entering a new phase. In recent years, house prices have shot up during a period of low general inflation and consequently we have benefited more than we have even been able to identify. What’s more, inflation-adjusted house prices were rising more sharply than we could actually appreciate. Now, the opposite is true; we have declining prices in an environment of rising inflation, which consequently means house prices are falling more sharply than cash prices. It is a bitter pill for the housing market.

Notwithstanding this, some people still wish to move or need to sell, which means as far as the national mainstream market is concerned, as the number of unsold property climbs, prices are likely to come down further. I therefore expect things to get worse before, assuming the mortgage market has eased, conditions start to improve. The expected pockets of resilience will be for genuinely quality family homes and for anything within the super-prime bracket.

It goes without saying that a downturn in any market will present opportunities, and the property market is no exception. Wherever I’ve been recently, I seem to meet wealthy investors looking at setting up vulture funds and there is certainly no shortage of capital arising from 15 years of economic prosperity. The credit crunch means, for the time being, the bottom rung of the housing ladder has effectively been removed for first-time buyers. In turn, this means there are greater numbers of prospective tenants than ever before. Rental yields for investors who own the right type of stock are rising. Having said that, there are plenty of investors who own the wrong stock and are now losing money.

When the market softens, it always surprises me that so many people trading upwards fail to see a potential drop in price as a relative one. The loss can be more than recouped by purchasing under similar conditions. But that is precisely what sentiment is all about and the reason why it affects activity to such a great extent. If you are looking to move in today’s market, make sure you can borrow the money you need in order to do so, set a realistic asking price on your sale and don’t go out looking for your new home until you’ve found an interested buyer. If not, you run the risk of negotiating both deals from weak positions. Always keep an eye out for opportunities to add value in the future and therefore reduce necessity to move again.

There is no denying we are in the midst of a down-turn, but all markets are cyclical and history shows house prices in this country have an upward trend. There are many disadvantages to living on an increasingly popular island, but - although it may not feel like it right now - we do have a housing shortage and an increasing population, which in turn will support house price growth in the years ahead. Meanwhile, let’s not all talk ourselves into depression and try to remember that a home is, first and foremost, a roof over our families’ heads.

Phil Spencer runs property search company Garrington. Find out more by calling 020 7376 6780 or visiting www.garrington.co.uk