Some of our readers declared that they were terrified at the concept of offering that much less for a property they wanted. Well, in the near term the answer is, unless you do, you’re going to lose money .. a lot of money.

An approach suggested by some other readers is to beat the estate agents at their own game. Simply, you get some of your friends to sign up with the same estate agents as yourself and they put in the offers at a lower value than you intend to. In recent weeks many estate agents are so short of orders going through the books that they themselves become your best friends prompting the seller to accept much lower (quote – ‘realistic’) offers.

There have been anecdotal reports that this is happening in some parts of London where small groups of city workers have clubbed together to drive prices down to more realistic affordable levels.

It’s clear that such action would be illegal if applied to the stock market or commodity supplies as these cartels often form to attempt to distort markets. However, the housing market is a highly unregulated environment and anyone who has sold or bought a house in the past will be only too familiar with estate agents tactics of ‘talking up’ markets. Clearly it’s now the turn of the buyer to name a price.

As ever our advice is to look at the peak value of properties in the area (October 2007) and offer no more than 70 percent of that value if you wan to be sure of a reasonable starting point for a house – of course you should then barter down.

Over time many of these local economies recovered as incentives to open service based businesses were introduced. Ten years later the economy boomed on the back of ‘being the means to service’ rather than ‘being the means to produce’.

Theories abounded that the ‘new economy’ would mean that the UK would be insulated from any future economic shocks. Indeed the UK seemed to have found secret of economic immunity – small business became the ‘new black’ and we all got on with our lives raking in cash.

Except for one thing, it was really a mirage. The service sector economy was based on a house of cards. People weren’t really getting that much richer, they just had access to more debt. As markets were flooded with easy credit, sewn with reckless abandonment by a new generation of banks and money lenders of all kinds, people just borrowed and spent more, convinced that their primary asset, their house would keep increasing in value forever, and anyway the cost of repayment was marginal with interest rates so low, so who cared?

So now, as the financial world and hence the economy starts to unwind we’re seeing the service sector economy start to collapse like a house of cards – caught in yet another ‘perfect storm’.

With a rash of banks announcing halved profits over the next ten days we’ll see them being picked off one by one as the results roll in. Over on the house price front we’ve seen yet another report of the tenth consecutive drop in prices with the number of sales reaching 1930’s proportions.

This has far reaching consequences; with estate agents closing at a rate faster than 40 offices a week across the country, they are increasing fees to sell stagnant housing – so with your house in free fall you’re now going to have to pay more for the pleasure of losing money. Of course this won’t save the estate agents and so there’ll be a lot of ex-estate agents looking for jobs – somewhere.

The restaurant trade is suffering badly, as people splash out on a takeway rather than splash out on a more expensive restaurant meal. Pubs are suffering massive decline – blaming the smoking ban – but in reality admitting that they can’t compete with low cost supermarkets.

The city of London is off course going through a massive hemorrhage at the moment with as many as 100,00 high earners being thrown onto the job market. Many of these jobless will not ‘sign on’ as unemployed, either because of stigma, or because the payments they’ll receive aren’t going to even begin to cover their exposure.

As these individuals cut back it will be the service sector economy that suffers most – ironically the precipitated demise of the service sector economy will fueled by the demise of the service sector itself. It’s happening already and it’s happening faster than we realize – when the steel works closes, it creates headlines, when your local bank cuts back on staff or your restaurant cuts staff who notices? As with all things there will be a point where it becomes apparent .. so we suggest you look for the signs now. Check out the empty shops on your high street … and be very scared.

We’ve got some strong advice to anyone considering buying a house in the UK at the moment – in order to build in some buffer for that dream house we suggest that you seriously offer at least 25 percent less than the current realtors valuation – chances are that if it get sold to someone else, you’ll be able to knock on the door end of this year and they’ll be happy to sell at any price.

With an astounding example of inappropriate timing, the UK’s Council of Mortgage Lenders (CML) yesterday announced that the equity release sector should be encouraged to grow by the government. 

Equity release schemes are designed to homeowners to release cash from the current value of their property – in other words equity release is a mechanism by which you can trade any gain from property prices for more debt.

Now, we weren’t sure we read this correctly, but it seems that the CML is actually encouraging more people to take on extra debt – this at a time when the financial markets are in turmoil, credit is impossible to get hold of and the threat of a house price collapse hangs like the sword of damocles over the overinflated UK housing market.So what are they thinking – well the clue is in the fact that mortgages have all but dried up and lenders are desperate to find outlets to make margin on loans.

So what better than to bring back the age old idea of getting the old, weak and vulnerable to raise cash by effectively selling off part of their homes. Anyone who remembers the early nineties will remember that such schemes abounded at the time, eventually backfiring on the borrowers as interest rates shot up and the borrowers found themselves unable to pay off debts and eventually evicted from homes they had spent most of their lives paying off. It’s a wonder that such schemes haven’t been outlawed or at least strict guidelines attached – and yet here we see the CML actually asking the government to encourage such schemes.

Our view – someone at the CML should stand up for responsible, prudent lending – clearly the CML is a lending body that has its head in the sand – the words ‘crisis, what crisis?’  come to mind. 

All eyes at the bourses in Europe will be on Santander on Monday morning. With confidence in the banking sector at all time low it seems that the Spanish bank has slipped up badly by allowing its British owned Abbey to offer an insane portfolio of mortgage offerings.

 Sometimes you just know that there’s going to be trouble, sometimes you wake up, read the papers and think ‘are they serious?’. Sunday morning, the British public woke up to headlines with lunacy, unbelievable and crazy in them. Yes, despite images of middle class brits lining up to withdraw their savings from Northern Rock, despite the melt down in sub-prime lending in the USA – Abbey has announced that it will start to offer 125% loans to mortgage borrowers.

There – we thought we’d mis-read, we thought it was a typo – but no – in these times of concern worry and crisis – Santander actually believes that offering 125% mortgage loans is a good idea.

 The Abbey was one of the UK’s original big four building societies, until it demutualised and was eventually snapped up by Santander in 2004. Since the original fuss about Abbey going to a Spanish company and being quoted on the Spanish exchange, not the British there has been some, though not too much, disquiet about what protection the Spanish would offer British savers.

 Well – it seems that the time has come – on Monday morning we expect a trickle of withdrawals from the bank as people start to worry that Abbey has lost it sense of reality. By Tuesday the papers will have picked up on the story and by Wednesday Abbey will start seeing the same lines outside its branches as Northern Rock, all at the time that the Spanish government is drawn into assuring savers that their money is safe.

Our advise to to Santander shareholders (and many are British pensioners) is to very carefully consider your positions with Santander and be very aware of what happened to Northern Rocks share price.

With results out this week looking to be dismal there doesn’t seem to be much going for the company – yet in the last few weeks the stock has gained significant ground, rising by more than 15% in the last 3 weeks.

So what’s going on? Well there are two schools of thought, first is that the company is likely announce a sell off of significant chunk of its business based in the far east, Japan to be specific. This sale could raise up to £75m.

At the same time rumours are starting to lift again that the company is ripe for buyout. Last year Permira offered a rumoured 210 per share. 

HMV is also rumoured to be cutting back 10% of the 330 stores its Waterstones group owns in an effort to cut costs.

The figures expected this week will not reflect recent cutbacks, which have been too recent to affect short term results.

The company has hired N.M. Rothschild & Sons Ltd. to advise the company on how to refinance its debt, the Sunday Express reported, citing a person close to HMV.

With the current whirlwind of M&A sweeeping through the city, speculation is that HMV may be ripe for an overhaul.