Blip or bust?

THE stickers in the estate agents' windows give the game away. Like straws in the wind they show which way the market's going. "New price" "Reduced for quick sale" "Or best offer".

Nearly £2,000 was wiped off the average value of a home in England and Wales during late December and early this month, according to property website, Rightmove. Annual house price inflation has continued downwards for some months.

But what exactly is happening to house prices?

Is this a crash or just a blip? And is this a good time to buy or sell? Should you leap in and buy, or hold your nerve and wait for prices to fall further?

The bad news is that no one actually knows for certain. Some experts have been warning of a crash for the past year or more, but have been proved hopelessly wrong. Despite the prophets of doom, house prices continued to soar. Overall, houses were selling for eight per cent more at the end of last year compared with last January. The UK is one of the most expensive places in the world to buy a house.

It is not as bad in our region as it is in London where a fairly average family home can easily cost £1m or more, but even though they might not have gone as far or as fast, house prices in the North-East have shot up out of the reach of many would-be buyers.

Houses cost nearly double what they did ten years ago. There are whole swathes of the country where not only can first-time buyers not afford to buy, but neither can young professionals on decent salaries. By the time they'd saved an extra £5,000, their dream home probably cost another £50,000 more. They just couldn't catch up.

The Royal Institution of Chartered Surveyors estimates that there are around half a million first-time buyers who just can't get into the market.

According to the Land Registry, which records the price of every property bought and sold, the average house price in this country is now £230,474. In the North-East it's £130,574.

Put your money in property, it seemed, and it would be, well, as safe as houses.

But not any more. A combination of factors - the global credit crisis, the buy-to-let boom, which helped push up prices, and the huge reduction in the numbers of first-time buyers has meant the market's changing.

In November in this region prices started to fall.

They were down by 0.9 per cent, one of the biggest drops in the country.

Could this be the start of a crash?

"Probably not," says Katherine Lockwood, manager and valuer at Sandersons in Stokesley. "No one really knows for sure. It's a bit of an unknown quantity at the moment, but our feeling is that prices are steadying rather than crashing.You always have highs and lows and in recent years we've had some incredible highs and perhaps prices had just got too high and needed to adjust. Some of our sellers are prepared to sit it out and wait, but we are advising others to cut their prices. We have reductions of anything from £5,000 to £50,000 on some of the bigger properties.

"But there are plenty of buyers out there. And if you have to reduce the price of your house, you just make sure you pay a reduced price on the one you're buying. Once you're in the market, it doesn't really make that much difference, but it might filter down and make life easier for first-time buyers which, in turn, would boost the market again. So it's swings and roundabouts really."

New flats and apartments are showing the biggest drop in price, mainly because so many have been built. There's hardly a corner of any town which hasn't seen a "luxury apartment block"

shoot up in the past few years.

They are aimed predominantly at the young professionals, but are often out of the reach of first-time buyers. And older people, who have the money from downsizing, aren't so keen to live on the second, third or fourth floor of a block often in the middle of town.

At Echo 24 , the new block on the old Sunderland Echo site in Sunderland, they have sold 144 of their 179 apartments, including one on the tenth and eleventh floors with stunning views, for £374,000. But many other flats and apartments in new blocks are slower to sell, especially those not in prime locations.

"For the price of many of the flats, you can buy a house now," says one Darlington estate agent, "and most people would rather have a house than a flat. With so many on the market, and more still being built in the town, I think prices are bound to flatten out."

Meanwhile, if you want to buy a brand new house, you could be in a position to drive a hard bargain as housebuilders rush to offer incentives on selected developments. These include paying stamp duty, estate agents' fees, or a five per cent deposit. Others will pay your removal costs, your legal fees, or arranging and paying for the Home Information Pack, or a £2,000 cash back when you complete.

"In the current economic climate, some buyers are struggling to buy their dream home," says Debbie Whittingham, regional sales and marketing director for Bryant Homes. "We've developed several incentive schemes for different buyers. Market Mover allows purchasers to reserve a Bryant home for a fixed price, even if they still have a house to sell. We will then market their existing property, organising everything from valuations, estate agents and covering agents' fees."

The other problem is the difficulty of getting a mortgage. The number of mortgages approved in November was the lowest for three years. Even though interest rates are lower, lenders are getting fussier. Recent global problems have made them nervous.

A spokesman for the Royal Institution of Chartered Surveyors says: "This will inevitably mean that it is harder for borrowers who have a chequered credit history or want larger loans in relation to the value of their houses to obtain financing on the sort of terms that have been available in recent years."

The easiest way to ensure you get a good mortgage at a good rate is to have a reasonable sum for a deposit. One hundred per cent mortgage deals are harder to get, you usually pay more for them and if house prices continue to fall you could end up owing more money than your house is worth - the dreaded negative equity.

On balance, it seems that it could be a good time to buy. Miles Shipside, commercial director at Rightmove, says: "Homebuyers are bagging what they see as bargains against previous prices."

Some prices, he says, have dropped by as much as ten per cent and other experts recommend that if buyers are offered five per cent below the asking price, they would be wise to accept.

But the very fact that lower prices are attracting more buyers means that there will be more activity, which, in turn, means that prices might start to rise again, though probably not at the rate they have been, so sellers holding out for their original asking price might have a long wait.

"Now is a good time for bargain hunters to press those committed winter sellers for a deal," says Miles Shipside.

The future might be uncertain, but at the very least there might be a small breathing space in the mad world of house buying - if only for a few months. For first-time buyers it still isn't easy, but it might just be a little easier than it's been for some time.