Knight Frank says we are now half way through the property crash and predicts sales volumes to hit their lowest point later this year…

Forecasting the market for next year, it expects prices to fall 30 per cent from their peak, taking values back to September 2003 levels. It believes prices will continue to fall until late 2009 or early 2010.

It also believes sales volumes will pick up, but will only reach 60 per cent of their long-term average by the second half of 2009.

The firm believes that equity rich investors and speculators are already in the market, targeting distressed sellers.

Liam Bailey, Head of Residential Research at Knight Frank, said, “Our recovery picture is based on the assumption that mortgage providers will adopt a far more conservative lending approach once the credit crunch unravels.

However, it is also worth noting that we do not have the oversupply problems of Spain and the US, and a shortage of housing will become more apparent with time.

“Whilst a market peak is hard to spot, so too is the bottom of the market. There are lots of buyers watching the residential market very closely, and they are desperate not to miss the floor when it comes.

“The winners in this market will be anyone with equity who can buy over the next six months. Those requiring significant finance will be unlikely to be quick enough on their feet. Vulture funds and cash-rich individuals will be the first to benefit.

“It may be hard to stomach, but opportunistic buyers are looking for distressed property sellers. They are interested in individual properties - repossessions in particular - and also development land, or even newly completed developments. In fact, anything where values are felt to have fallen as far as they are likely to.”

Knight Frank’s forecasts compare with that of Professor David Miles, Chief Economist at Morgan Stanley, who thought that house prices might have only another 5 to10 per cent to fall and that the market could begin its recovery next year.

However, Andrew Clare of City University’s Cass Business School said that by 2010, house prices will be 40 per cent lower than peak, and there would be no recovery to last year’s prices until 2023.

He described this as very bad news for anyone who bought a property last summer and said negative equity would be a feature of our economic landscape for years to come.

Source: estateagenttoday.co.uk