House market fuels sales dip

The combination of a stagnant housing market and the credit squeeze is making it much harder for potential buyers to fund purchases.

The sharp dip in both price and the volume of house sales has been attributed to buyers staying away from the market until the outlook becomes clearer. Some estate agents have dropped prices by up to 20% and anticipate further reductions over the next six months.

The UK economy is set to experience its worst period of growth in 15 years - and credit, which was previously handed out relatively freely, will be much harder to acquire.

Simon Hall, director at the Leeds office of Fleurets, said: "It's having an effect on all property transactions. If the housing market slows down or the prices go down, it's harder for people to get the equity required to go into the licensed trade.

"People's house sales are a very good source of funding and, therefore, buyers - it's certainly worrying."

Some purchasers' equity could be lowered or cut off completely if they have to sell at a reduced price or are unable to sell at all.

Stephen Taylor, of Guy Simmonds, said: "We're telling people to be realistic when selling their homes.

"House prices may have dropped sharply over the last few month but we must remember that prices have been vastly over-inflated in the first place. As long as the house was bought less than two years ago they should be alright."

Banks are more willing to lend on freeholds than leaseholds because of the security of the bricks and mortar value. They still, however, require sites to be properly valued and the applicants to have some experience or training in the trade.

Stephen Taylor said that his firm had barely felt the effects of the credit squeeze in the freehold market, but that lending on leaseholds has been restricted by the current financial conditions.

Banks will now invariably require the purchaser to have a house as security before any money is lent.