House prices to fall 10% in 2009

IF I had a quid for every time someone asks me what my predictions are for the 2009 housing market, I'd be a very rich girl by now.

There are a lot of worried people out there-so in the spirit of the festive season I'll forgo the pound coins to tell you what I think will happen.

From homeowners concerned about the falling value of their properties to first time buyers trying to get that first vital foot on the ladder, it's going to be a ROLLERCOASTER year. So hold on tight-these are my predictions:

PROPERTY VALUES

First, the good news. Family homes in desirable areas will always fare well, particularly if they are in the catchment area for good schools. There is a real shortage of this kind of property.

But the bad news is that people in newish luxury flats will suffer because there are too many of them around in our over-developed cities and towns. Prices will tumble-and big developments where there are more than 100 properties will feel the pinch most.

Overall, I reckon we might see as much as a 10 PER CENT drop in house prices in 2009.

HOUSING MARKET

Estate agents aren't exactly going to be rushed off their feet this year. There'll be a lack of mortgages and people are going to be sitting tight-worried about their jobs as unemployment soars.

For those who HAVE to move, regardless of what's going on, it'll be a question of taking a deep breath and hoping for the best.

There are a growing number of people who sold last year and are renting. They're sitting on their cash waiting for the market to bottom out before they snap up a bargain. But they face a long wait.

MORTGAGES

I think the interest rate will be cut by another half per cent next month, but it'll be April or May before mortgages start flowing again.

Don't expect offers to be what they were three or four years ago. Banks and building societies will be playing it carefully.

You'll probably be looking at deals worth three or four times your income, not the five or six times income multiples we were seeing a while back. And 125 per cent mortgages? Forget it. Most lenders are going to want 10 per cent deposit as a minimum.

LANDLORDS

There'll be plenty of demand for rented homes because mortgages are scarce and people are wary of buying right now anyway.

I don't thinkrents will be as high as they were this year because there are more rental properties on the market. That's been caused by people renting out their homes because they had to move but were unable to sell at the right price.

These 'accidental landlords' probably won't stay in the lettings market for ever, but it does represent a very significant shift. More of us are renting now than buying for the first time in nearly 20 YEARS.

If you are considering letting your property, landlord's rent guarantee insurance is a must. It's a policy you can take out to cover your mortgage payments if your tenants don't pay.

FIRST TIME BUYERS:

IF you can get a mortgage then mid to late 2009 might be a good time to buy. It will give you time to see how the economy is going and if the rescue measures put in place recently have actually made a difference.

Don't forget, your deposit is the buffer between the amount you've borrowed and being in negative equity. So, while you're waiting for the next few months to play out, put as much money aside as you can.

I reckon that in late summer there will be a GLUT of properties around the £175,000 mark coming on to the market. Sellers will be cutting their asking prices to duck under the Stamp Duty Land Tax threshold before it goes back down to £125,000 on September 2.

REPOSSESSIONS

The Government's Homeowners Rescue Package should help to stem the tide of people defaulting on their mortgages.

But for some, it will be unavoidable. Those likely to be worst hit will probably have bought in 2006 at the top of the market, and took out a 95 per cent mortgage.

For them, it's going to be a very worrying year.

One ray of hope I can offer you all is that the the property market WILL eventually recover. Remember that property prices historically double every ten years, regardless of economic or political climate.

If you WANT to move, then don't rely on interest rates staying low for too long. Eventually, they will return to 'normal' levels again.

If you take out a mortgage in the next year, do the maths and make sure you can still afford the repayments if the rate were to rise by one or two per cent.

Have yourself a happy-and as far as property is concerned-cautious New Year!

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