OBSERVERS DIVIDED OVER MARKET UPS AND DOWNS

There is clearly a risk that buyers, guided by the Nationwide figures, will slash offer prices during the summer months. Unless they are desperate, vendors will sit tight - sending turnover levels even lower than they are at present.

Observers are sharply divided about where the market goes from here.

Capital Economics - the consultancy which led the way in predicting heavy house price falls two years ago - says Nationwide figures are in line with its own prediction of a 20% fall in prices by December 2009.

"The report shows the pace of house price falls is accelerating, suggesting this housing market downturn is looking likely to be just as bad, if not worse, than the early 1990s slump," says property economist Seema Shah.

Capital Economics says the Land Registry figures show "plenty of scope for further falls in months ahead".

However Chris Brown, president of the National Association of Estate Agents (NAEA), says: "People need to remember the market is stable and we are not seeing massive price drops.

"There are strong economic factors at play, such as high employment and low interest rates, and sales are still taking place.

"Moreover, people need places to live and property purchase remains a good long-term investment."

NAEA figures claim the gap between asking and sales prices remains unchanged at 4.7%. The number of buyers on agents' books is down slightly, from 249 in March to 237 in April.

Trevor Kent, who has an agency in Gerrards Cross, Bucks, with the highest average house price of anywhere in Britain, says: "Nationwide's figures suggest an apocalypse, but I believe the worst is over.

"The slide won't continue at this rate.

"Shrewd buyers have contrived to put off buying for the last six months. They were right to do so, and now they can get the same property for 6-8% less than nine months ago.

"But it is like returning to a falling stock market. There comes a point when you decide to do something with your money, and we may be reaching that point now.

"The level of sales will begin to increase a little later this year. I think we may be over the worst, although it will still stay tough for at least a year."

However Henry Pryor, founder of Primemove, an aggregator bringing together over a million homes for sale from major portals, believes that "Nationwide is at last admitting what everybody else in the real world has known for the last three months.

"We haven't found the bottom of this market yet, and with many areas already down 10%, Nationwide's calculation of a 2.5 fall for last month could soon look an under-estimate," he says.

"I don't think Nationwide is taking into account the abysmally low levels of turnover. Transactions are down in places by 60-70%, and it can be difficult them to know what an average home is worth.

"I did a survey during the Crewe and Nantwich by-election, and sales there in the first quarter were down 70% on the same period of 2007."

Pryor reckons the worst - but possible - scenario is a 10% fall between the collapse of Northern Rock in August 2007 and today, a further 15% fall between now and Christmas and a further 10% off in 2009.

"Properties sell only when owners have to sell, and the only buyers are those not needing large mortgages.

"To say the market is stabilising is like telling people Isaac Newton's apple won't hit the ground. I see no evidence of any fresh impetus to turn the market back to a positive direction."

Rob Bruce, research manager at Hamptons International, which has 85 offices in southern and western England, thinks the Nationwide survey is a lagging indicator of the market.

"We have seen a large correction of 10-15% in prices since the peak last summer, with prices now flatlining to some degree. We have seen an 83% rise in new instructions but a 39% fall in the number of offers, so stock levels are up 42%.

"Without question, buyer and seller have to be much more aware of market conditions in 2008 than in 2007. The reality of the market is hitting home," he says.

Bruce claims many areas of London have seen rising prices so far in 2008, including Waterloo/South Bank (up 4.6% in the last quarter) followed by Camberwell (3.9%), Battersea (3.4%), Wimbledon (2.4%) and Crystal Palace (2.3%).

But Lucian Cook at Savills Residential Research says: "We haven't seen the end of the falls this year. Year on year, Nationwide thinks we're 4.5% down, and that will be 8% by December.

"As for December 2009, much depends on credit markets. If they ease by the autumn, we should avoid recession and get away with small falls - maybe 0.2% - in 2009, followed by small rises again in 2010.

"If credit markets don't ease, we go into recession, and falls will be more severe: perhaps 25% from peak to bottom."

Stuart Law, chief executive of Assetz for Investors. which builds portfolios for investors says people should be wary of the Nationwide figures and statistics of this type for a single month.

"Since the collapse in mortgage markets, Nationwide and Halifax figures are very likely to distort the market, because they relate to buyers facing heavier purchasing costs and determined to get compensation from vendors in the form of a lower price," he says.

"Both Nationwide and Halifax figures could flatten off between now and September. But remember that they don't represent the market as a whole, because the non-mortgage market is probably 20-30% of the total, and that is outside the scope of these figures, as are loans through other banks and lenders which often involve a smaller proportion of price.

"In the autumn a firmness in house prices could return," Law says. "Some people might be very surprised."

He also argues that 2008 is a good time to buy a newly-built house - "because all developers are forced sellers" - and also old property from distressed London vendors via auctions and repossessions.

"Professional investors have recognised this is a very good time to buy: when sellers are weak, try silly bids," he says. "The man in the street hasn't this realised yet."

The 216,000 mortgages approved during April (worth £24bn) represent a fall of 21% on April 2007.

INFORMATION: Assetz for Investors (0845 400 9000).

:: ARE NEW HOMES AVOIDING THE WORST OF MARKET SLUMP?

This is a good time to look for a brand new penthouse - and not so good if you want a modest apartment in one of those blocks which are a familiar sight in Britain's towns and cities.

That's according to a report on new homes sales in April from Smart New Homes, a website claiming to represent 85% of new homes for sale in England, Wales and Scotland.

It reckons the average price of a penthouse fell nearly 19% in April, down to an average £464,500. Some hapless penthouse purchasers in February can be excused for sitting in whirlpool baths on the balcony and hoping the bubbles ease the pain of negative equity.

By contrast the survey says apartments - which account for 53% of all new homes for sale - fell only 0.5% to £226,600. Detached houses rose 2.5% to just over £317,000.

Says Smart New Homes: "Buyer confidence is showing signs of returning to the market, with demand price (the price buyers are prepared to pay) following the upward trend set by the stock price in April."

Smart New Homes detects a marked regional pattern to the new homes market too: over the past year, the average new home is up in price in South-East England (by 7.15%); South-West (5.2%); and Scotland (7.8%).

But it is down everywhere else, with the biggest falls in Wales (-7.6%); the North (-6.4%); East Midlands (-6.3%) and the North-West (-5.7%).

The falls could explain the big drop in house-building starts reported by the National House-Building Council (NHBC), which says the number of applications to build new homes in the three months from February to April was 37,700 - a 27% fall on the 51,500 figure seen in the previous year.

There was a 32% drop in starts of homes for open market sale. Starts for housing associations fell by only 9%.

Builders always hate to admit any falls in selling prices, fearing they will alarm their bank managers.

But if the new homes market is as solid as Smart New Homes' figures appear to suggest, it's a puzzle that share prices of big developers have collapsed in recent months.

Barratt, for instance, has seen its share price drop from around £12, to barely £2 today, while Persimmon is down from £14-plus to under £5.

:: JOINT AGENTS DON'T ALWAYS SHARE A FEE

Home owners often use more than one estate agent to find a buyer in difficult markets, which might create a problem over fees when a sale eventually goes through.

A big bust-up between Foxtons, the London estate agent sold by its owner John Hunt to private equity for £370m back in May 2007 and Hamptons International has reached an intriguing verdict in the Court of Appeal.

In October 2004, Foxtons offered a home in London at £1.4m. They showed the property to one buyer who eventually bought it a year later when rival agents Hamptons were then marketing it.

Hamptons collected the fee but Foxtons wanted a slice of it, claiming they originally found the eventual buyer. Kingston County Court upheld their view, before the case went to the law lords.

Now, the Court of Appeal has ruled otherwise: although Foxtons had originally shown the buyer over the property, they did no negotiation or persuaded them to go ahead. In fact, the buyer initially ruled out a purchase when shown around by Foxtons, fearing too much repair work was needed.

The law lords ruled Foxtons needed to have "introduced the purchaser to the purchase", not merely to the property, to deserve a slice of the fee.

Chris Rowntree, a partner of Cotswolds firm Hayman Joyce, says the case was not a joint agency in the established sense - when agents agree the eventual splitting of the fee at the time of taking a property on.

He thinks the code is equally clear when one agent replaces another.

"If we as sole agent introduce a potential buyer to a property, and then get sacked by the vendor, if that person buys through another agent within a six-month period, then we claim the full fee.

"That follows the code of conduct set down by the Estate Agents' Ombudsman and is generally accepted by reputable agents.

"This case muddies the water somewhat, without in any way affecting the size of fee a vendor must pay."

Rowntree thinks when a property switches from one agent to another, the first agent will now list all potential buyers already shown over - making it plain to the next agent that he will claim a fee if any of these is the eventual buyer.

However, the Court of Appeal ruling means that merely introducing an eventual buyer to the property is not necessarily enough to get part of the fee - if the next agent on the case does all the negotiating work.

Vendors who change agents in future might need to clarify this ruling with past and future agents acting on their behalf - to avoid an expensive re-run of the same dispute.

Rowntree says that on average, sole agency (for 12 weeks and two-week notice period) costs 1.5%- 2% of the price secured; while a joint agency costs 2-2.50% - and the fee is not always divided equally.

Multiple agency costs 2.5-3%, because the risk increases of an agent getting nothing at all if his or her firm fails to land the sale.

INFORMATION: Hayman-Joyce in Moreton-in-Marsh (01608 651 188 and www.haymanjoyce.co.uk).