ANXIOUS VENDORS SWITCH AGENTS TO CHASE SALES

This emerging trend also explains why agents of all sizes are closing a rising number of branches. While they flourish in good times by selling one in three of the homes on their books, many now struggle to shift one in six.

"It typically costs in the region of £450 to put a property on the market, and with a record backlog of instructions, agents are having to pick and choose which properties they take on," Pryor says.

"Although there are over a million homes advertised at the moment, that figure includes homes being marketed by more than one agent."

Primemove.com says that on average it is taking over 82 days - nearly three months - to sell the average home.

Pryor says the Council of Mortgage Lenders prediction that 2008 will see a 30% crash in the number of property sales already looks optimistic.

"In 2007, 997,000 homes were sold. At the half way stage this year, the total in 2008 is likely to be closer to 550,000," he says.

As turnover collapses, prices seem likely to follow.

"Based on evidence we have today, prices are already 20% lower than they were last year, and some look like they could fall as much as 50% in total," Pryor says.

Capital Economics has forecast a housing bust for three years and property economic Seema Shah says things are getting worse.

"House prices in the second quarter fell 5.5%, the largest quarterly decline on record by quite a way. The second largest decline - 3.5% in late 1992 - pales by comparison.

"Dire news from the housing market in recent weeks suggests that worse is still to come," Shah says.

"Mortgage approvals have slumped, there are signs the economy is slowing sharply, while recent deterioration in the labour market is set to gather pace over the rest of the year.

"None of this bodes well for buyer confidence."

:: TENANCIES ARE A LONG-TERM BET ON HOUSING MARKET

Shrewd investors can beat the current market blues by targeting homes occupied by long-term tenants on regulated tenancies at discounted rents, says one of London's top auctioneers.

Chris Coleman-Smith, who heads Savills Residential auction team, says interest is strong in 25 houses in the suburbs offered in his July 21 sale by Thames Water. The properties are occupied by tenants who are set to enjoy rents way below open market levels for as long as they live.

Because tenants are entrenched, these homes change hands for prices far below vacant possession value on the open market.

"These properties, initially provided for employees of Thames Water, are really the creme de la creme of the market, the real antiques for property investors, although most people don't realise it yet," Coleman-Smith says.

"Instead of chasing buy-to-let properties on assured shorthold tenancies (ASTs) which offer minimal rises in capital values, smart bidders realise the real capital gains are made in a sector where you need to be able to lock away a wodge of capital for perhaps 10 or 20 years.

"Buy a home with a sitting tenant at a discounted price, and you must sit tight to await a big jump in value when the property eventually becomes vacant.

"At our last sale, we sold a one-bedroom flat with a sitting tenant on the borders of Kensington for £268,500. The buyer was an American - who told us he had bought it for his five-year-old son.

"He reckoned that in 20 years time, it would look a pretty smart investment."

There's a batch of the Thames Water properties in Mogden Lane, Isleworth included in Savills' sale: Coleman-Smith estimates they will fetch about £130,000 each, and the rent currently paid is around £3,800 per year.

But when the tenant eventually moves out or dies, vacant possession value should be well over £200,000.

The same sale includes several two-bedroom flats in Enfield, north London, guided at £100,000. Annual rents for these properties are currently around £4,500. With vacant possession value around £140,000, even the tenants might be tempted to buy up and then move out in a year or two to unlock fat five figure profits.

The Savills sale in central London on July 21 also shows how much property values are dented by the activities of local vandals.

It includes a job lot of half a dozen two-bedroom flats guided at £350,000-plus in Peckham, close to shopping centres and Nunhead Station for rail services into central London. The flats were boarded up after "massive vandal and fire damage", as the sales brochure delicately explains.

This is an area long tipped as an up-and-coming corner of south London with millions of pounds already invested to kick-start urban renovation.

"This is a humdinger of a prospect, because a successful bidder has so many options: restore the good-sized flats already there, knock down and build new, or add another floor of apartments to the existing block," Coleman-Smith says.

"The site near Nunhead Green, on the south side of Peckham, is really quite villagey. Directly opposite is a superb new development by a developer who plans to rent them out, at least until the market recovers."

Savills' brochure advises that the battle-scarred building is "of interest to developers and investors".

The sale also reveals that housing trusts and housing associations are selling off older houses and even blocks of garages - possibly to build cash piles to buy into new developments, one suggestion being widely mooted to take unwanted, but completed stock off the hands of hapless house builders.

Family Housing Association, for instance, is selling off a three-bedroom terraced house in Southwark, south London, guided at £215,000-plus. Another association, Broomleigh, hopes to raise £70,000-plus for a batch of 15 lock-up garages in Orpington, Kent.

INFORMATION: Savills Residential Auctions (0207 824 9091 and www.savills.co.uk)

:: £500BN PRIVATE INVESTMENT IN HOMES 'STABILISES' MARKET

Fears about the safety of the buy-to-let sector have seriously damaged Bradford & Bingley and could topple other lenders if bleak doomsday warnings are confirmed.

However the private rented sector of housing has become a major industry player, contributing over £30bn a year to the UK economy.

It is also the UK's biggest property investment asset class, worth over £500bn, says Professor Michael Ball of Reading University in his new analysis of buy-to-let for the Association of Residential Letting Agents (ARLA).

He argues it is bound to keep growing - despite current tremors shaking the housing market.

"Even if Government hopes of increasing housing supply are met, the current 56% of 30-34 year-old couples able to at least afford to buy a purpose-built flat will fall to 46% by 2016 and only 34% by 2026."

Ball says the private rented sector has grown "substantially" in two decades, from just over two million in the early 1990s to almost three million in 2008.

Only 13% of privately rented properties have been built since 1985, and almost two-thirds were built before 1945, although most have been recently modernised.

While owner occupation levels have stayed virtually static for the past decade, Ball says "the biggest change over the past 20 years has been the transformation of the private rented sector from a declining sector with extensive regulations and an ageing population to a modern one appealing to young tenants who value the flexibility of their lifestyle: they are 7.5 times more likely to move in any year than homeowners".

The key to the revival of the private rented sector has been the increased availability of buy-to-let mortgages: over 1m were outstanding by the first quarter of 2008, worth £126bn.

"Their expansion has faltered since mid-2007, with new gross advances down by a fifth by spring 2008 compared to the exceptional boom of a year earlier," Ball says.

He says the image of buy-to-let is unfairly tarnished by the spectacle of new inner city flats purchased with high mortgages, which are now losing value rapidly.

"Ostensibly these purchases were investments in buy-to-let, whereas in reality they have simply been highly speculative and sometimes fraudulent in nature.

"Outside the wrapper of so-called rent guarantees, attractive to the greedy and gullible, much of this sector of the housing market has had little to do with what is normally regarded as rental investment."

Ball says this sector is now experiencing some of the largest price falls in the current downturn because of these excesses, and are highly visible in certain areas of Britain's cities, especially in the north.

"But they represent only a tiny proportion of the overall housing market and, so, the consequences are likely to have little effect beyond micro-local impacts."

Although Ball predicts private sector rents could rise by 10-15% in both 2008 and 2009, he says the private rented sector helps to stabilise housing.

"It accommodates those who, by this stage in the housing cycle, would be over-stretched borrowers with rising negative equity.

"A rerun of the 1990s, when negative equity prolonged the housing market recession and blighted the lives of many, is less likely to occur in this downswing as a result.

The report says the number of private tenancies is expected to keep on rising, by about 3% per year.

"My assumption is that experienced investors are taking a wait and see attitude to current market condition," ARLA spokesman Malcolm Harrison says.

"But some will still be buying, in areas where they know and understand both the housing market and the rental market."

INFORMATION: Part I of Professor Ball's report "The Modern UK Housing Market - Origins and Prospects" is available on www.arla.co.uk.

ends