First the bad news. The UK housing market is experiencing its most significant slowdown since the early 1990s. On almost every measure across the prime and mainstream markets and the new-build sector, the market has shown a worsening performance over the last six months. With regional and local market variations, house prices across the UK have been falling since September, with prices in April approximately 8% below their autumn peak. Prices fell 2% during the first quarter of 2008 alone. More noticeable has been the impact of the market slowdown on sales activity, with sales volumes almost 35% below the long term average in the first quarter. The most significant driver behind the weak market conditions has been the continuing fallout from the credit crunch which began last autumn. Access to mortgage finance has been severely restricted, and the cost of finance has risen at the same time, despite cuts to the Bank of England base rate, currently being held at 5%. Now, slightly better news. Knight Frank’s forecast is based on the assumption that the recent improvements in the commercial money markets will feed through to the mortgage market, and we will begin to see more normal conditions emerging during the next few months. Even with these improvements, there is little hope of rising prices at the current time. We believe that prices will start levelling off in the second half of this year and that there is scope for some limited price growth during 2009. Our relatively positive outlook for the UK market in terms of pricing, is based on the fact that without sharply rising interest rates or unemployment, there is not yet a large number of forced sellers.

What does all this mean for Herefordshire, Monmouthshire and the borders? Results are proving that prime country houses are not being unduly affected and, indeed, prices are every bit as high as last year. This is purely a supply and demand issue resulting in competition. The all-important middle range continues to sell providing stock is launched with sensible expectations, not always witnessed when there is vendor concern matched with fierce agent competition.

The core sector of the market which witnessed the gargantuan increases of the last five years will have to accept that there is a correction occurring. But never forget that, except for the unfortunate few, owning your house has still been the best investment you could possibly have made.