Outlook
Accurate predictions of future house price shifts are difficult to make. Certainly, the market will become increasingly fragile before any improvements are seen. Recovery will rest upon renewed consumer confidence and this is currently very weak. We anticipate further falls in capital values of between 5% and 10% in the second half of 2008. The lettings market, however, will continue to strengthen gradually as occupation shifts from ownership to tenancy in the face of tighter lending constraints. Consequently, opportunities for investment will improve.

The much publicised over supply of new build flats in city centres will require imaginative solutions from owners or lenders. Leasing arrangements of individual blocks will assist service of existing debt and allow owners to warehouse stock pending recovery. Many developments originally designed for the buy to let market have been severely affected by the sudden collapse of this sector. Some may be suitable for the provision of affordable, key worker or student accommodation.

During the first half of 2008, lenders showed a reluctance to repossess, preferring instead to work with borrowers on “rehabilitation”. The scale of the current crisis, however, will render many cases of failure irreparable and, over the next twelve months, auction houses will experience rising numbers of possession instructions as banks and building societies strive to limit the net numbers of homes held on their books.

There is a sustained demand for realistically priced stock in the sale rooms and, in order to restore success rates, auctioneers will need to be robust when selecting the right stock for the right clients at the right prices.