Recession? Not in our street

Recent world events and a jittery economy are bound to reduce house prices nationwide, aren't they? Not necessarily, says Penny Jackson. Bargain hunters may be ready to pounce, but the gazumpers are still very much in evidence, too

It is not difficult to trace the large house with its sweeping driveway to a particular part of London. In a leafy road of 1930s-built homes, it is unmistakably Hampstead Garden Suburb, and prices here start in the millions. One might expect to find here evidence of bad reactions to the jittery stock market and world events. But the house in Winnington Road, with a guide price of £2.25m, far from languishing in the doldrums, is enjoying lively competition. So how does this stand as an example of London values at the top of the market and how their performance affects the country?

It is not difficult to trace the large house with its sweeping driveway to a particular part of London. In a leafy road of 1930s-built homes, it is unmistakably Hampstead Garden Suburb, and prices here start in the millions. One might expect to find here evidence of bad reactions to the jittery stock market and world events. But the house in Winnington Road, with a guide price of £2.25m, far from languishing in the doldrums, is enjoying lively competition. So how does this stand as an example of London values at the top of the market and how their performance affects the country?

Jeremy Gee, of Glentree International, the selling agents, believes this clearly illustrates how fragmented the market is. "In this area, we still have more buyers than we have houses and they do not, in the main, come from the City," he says. "Many of the them have amassed their money in business and because of this we have seen no negative reaction to the stockmarket. Even if there is a slow-down here, buyers have learned that if they hold on, the worst tends to be over quickly. Ten years ago there was panic selling and people were letting houses in the same road go for between £800,000 and £1.3m, but within 18 months they had made up ground again."

But in sought-after London areas such as Kensington, which is heavily exposed to the employees of American merchant banks, there has been a noticeable slowing, with fewer people viewing. But house prices are not expected to rise over the next three months, says FPDSavills. Yolande Barnes, of FPDSavills Research says falls being noted are in asking prices rather than values. "It is not surprising if 10 per cent is coming off asking prices, given that they were 10 per cent ahead of values anyway. Where people have been buying on the back of good bonuses and a secure job, there will be some uncertainty."

Any crisis, she says, will be driven from the top. "If there is a downturn – and that is a strong 'if' – then it is not until people are forced to sell that prices really fall. For most buyers there is no affordability problem or gap, because borrowing is incredibly cheap now." One sector in which there might be a fall-off in values, she feels, is in the loft-style apartments appearing in newly gentrified areas.

The theory that the rest of the country follows London explains why values are followed so closely in the capital. The experience of north-west Norfolk is a case in point. Malcolm Duffey of Belton & Duffey estate agents is finding that, although some lovely houses are coming on the market, there are fewer buyers. In common with all agents, he says homes in the favoured hotspots are still selling well, even above the asking price. "Many buyers from London are very nervous about being made redundant. They might well have lost £50,000 on the sale of their house and so are expecting to negotiate in Norfolk. A £350,000 house is likely to see offers close to £325,000, and this process starts to filter through into all sectors of the market."

In Scotland, the buoyant markets of Glasgow and Edinburgh remain largely unaffected by the jittery south of England. John Brown of DTZ sees the seasonal changes as more significant. In Livingstone, mid-way between the two cities and a victim of large-scale redundancies in the new-tech industry, prices have held up well. "We are selling new homes there from £215,000 upwards with no problems."

So what of the first-time buyers? Has talk of a downturn lessened the appeal of owning property? No, says Andrew Cuckill, of Aubrey Lee & Co, in north Manchester. "The demand for homes up to £100,000 is still strong. Buyers can get staggeringly good mortgage packages and see no reason to panic at the prospects of a slow-down. Most people here cannot comprehend the London market, let alone feel touched by it."

And even in Manchester's city centre, where prices are far higher on the new developments, the market has remained robust. "Surprisingly so,'' says Julian D'Arcy of Knight Frank. "We have been as nervous as anyone, but our sales rates have stayed at the same level . We sense a nervousness but it is not detected in sales figures. There has even been a small flight from equities to property with more genuine investors rather than speculators."

In the Midlands and East Anglia, the market is pausing for breath, says Alan Gottschalk, of Bradford & Bingley. "We saw a knee-jerk reaction from buyers and sellers after the events of 11 September, and that had an immediate impact on the market, which stalled for two weeks. Now we have returned to normal levels. We expect no significant fluctuations. Confidence has been knocked a little bit, but there was fragility in the market even before the recent events."

At a time when prices are perceived to be falling, Yolande Barnes feels the property vultures are waiting to swoop on a bargain. In the country house sector, Henry Holland-Hibbert of Lane Fox has already seen purchasers trying it on. "More are offering significantly less in the hope that vendors will sell. But houses for £500,000 and less are doing well."

Charlie Ellingworth, of Property Vision, the buying agency, has no shortage of buyers wanting to move to a more expensive property. Negotiations might be tougher and people will have an eye over their shoulder, but a desirable house can still draw competition. "Only last week, we were gazumped," he says.