Homeowners selling up to rent

HOMEOWNERS are stepping off the property ladder and renting in the hope that an imminent price crash will allow them to snap up a bargain.

A survey of London estate agents shows that increasing numbers of homeowners are becoming 'in-betweeners' as the market becomes more jittery, fuelled by comments from Bank of England Governor Mervyn King that prices are almost certain to fall.

Miles Shipside, from the Rightmove website, said: 'When house prices are racing ahead, people dare not drop out of the London market for fear of being left behind.

'But in a stable or slowing market people feel they can go liquid and invest their money elsewhere in the knowledge they can either snap up a property bargain as a cash buyer or, if prices do come down, buy at a lower price in the future.'

Russell Jervis of agents Haart said: 'Several of our clients have sold and are not buying for the time being. They have taken the view that the market has reached a peak and are happy to go into rented accommodation.'

The situation has the benefit of reducing the length of house-buying chains. 'When people sell their homes without buying another at the same time, the property chain comes to an end,' Shipside said.

'Many a housing transaction has come to grief because a chain has unexpectedly collapsed, so anything that reduces the length and number of chains must be a good thing which will help reduce the log-jam in the market.

'Equally, when that seller decides to buy another home, he or she will be a cash buyer and, once again, at the end of a chain and in a good position to negotiate on price.'

According to property services firm Hometrack, house prices have stalled in almost a quarter of London boroughs. Last month prices were frozen in seven boroughs, while the average increase London-wide was only 0.4%.

City fund manager Tony Dye predicts London's market will reduce by 30 over five years.

Meanwhile, the 'in-betweeners' are able to benefit from relatively low London rents. A study by property consultants Savills showed renting in London is now cheaper than buying in nearly every borough.

House prices have soared over the past eight years but rents have remained stable - and in some cases have fallen because of a glut of properties bought to let by investors keen to cash in on low interest rates.

But analyst Ed Stansfield of Capital Economics said: 'Although we predict house prices will fall, people considering in-betweening should be very careful. The cost of legal fees, agents' fees, removals, time spent and other issues related to renting must be taken into account to see if it all adds up.

'On the other hand, people who need to move now should certainly consider renting for a year or two as they may find property significantly cheaper when they return to the market.'