Credit crunch won't spark housing market crash, insists estate agent

HOUSE price growth in the Capital is slowing as the credit crunch tightens its grip, but a crash is not on the cards, top-end estate agent Savills said today.

In an interim management statement, the firm said that the current economic crisis had started to affect London's luxury house market, with prices falling 1.5 per cent in the first three months of the year.

But the firm's Edinburgh office said that the economic conditions have only had a slight impact on the Capital luxury house market.

Jamie Macnab, director of Savills in Edinburgh, said: "What has happened as a result of negativity in press reports has been the inevitable slowdown of the market, and it was slow over the Easter break.

"However, things are picking up again now. This time last year was booming, the best ever in the market in my 20-year career.

"Our market doesn't go from boom to bust, but the economic situation did have some bearing on it."

In its latest Scottish residential market review, Savills, which mainly deals in properties valued from 500,000 to 2 million, forecast average house price growth this year of four per cent, down from 12 per cent in 2007.

When Savills announced its results for the year ended December 31, 2007, its chairman reported that 2008 would be a challenging year for the property industry worldwide.

Trading in the first quarter of this year has borne that out, according to the company.

The UK commercial property investment markets have seen further rises in yields in the first quarter, but at a much slower rate than was seen towards the end of 2007. Savills said that regional luxury property prices fell by 0.5 per cent, but Savills said prime property markets across the UK were under pressure.

Top-end house prices had been holding up well despite the tightening in credit markets, which has hit values in the wider residential and commercial property sectors.

Mr Macnab said: "There is some uncertainty on the behalf of buyers because of what they read in the papers, but I think that will settle down.

"If another bank were to have problems then things might be different.

"However, the top-end market in which we deal is less restricted than that where people have to find mortgages."

Savills said the outlook for its residential and UK and US commercial property operations was dependent on how quickly confidence returned to financial markets.

Kate Moy, an analyst at Numis Securities, said the prime property market was set to see continuing falls, although she added that it was likely to be less affected than the mainstream residential housing sector.

"We're only talking about minor decreases, but I don't see an end to the attrition of prices for some time," she said.

"There will still be wealthy buyers, but there's a big gap emerging between what a seller expects to get for a property and what a buyer expects to pay."

Savills is best known in the UK for its estate agency and commercial property investment businesses, although the group also operates in property planning and valuation consultancy, fund management, financial services, and property management, which contribute around 40 per cent of operating profit.

A quarter of its revenues also come from its businesses across Asia Pacific, which has seen continued strong residential and commercial property markets.