There seems little doubt that 2012 will be a challenging and potentially irrational property market.

With confidence badly shaken by recent economic news and ongoing Euro crises, coupled with pressure on household finances and job security concerns, it is no wonder buyers and seller are nervous and trading stifled.  Traditionally the property market cycle has been seasonally led, but it has become and will continue to be determined more directly by economic peaks and troughs. 

Despite headlines fuelled by reports on escalating economic crises which are de-stabilising the whole economy, the UK property market historically has proved time and again that it has a strong propensity to bounce back: there will always be an underlying demand to trade in property as people outgrow their homes and need to upsize or downsize, or move with their jobs.  Michael Fiddes, Head of Agency at Strutt & Parker comments: 'We will see less of the "ambivalent seller" (last year 30% of the market was made up of these sellers) who is likely to disappear but an increase in those that actually have to sell.' Fiddes predicts transaction numbers for the majority of Strutt & Parker's clients - i.e. equity-rich home owners - will be similar to 2011 but that further price falls are inevitable as the great divide widens (overall estimating down by around 4.5% but more in some areas) until the market finally finds its level. 

Indeed, 2012 will be the year of the great divide:

• North/south;
• London/the country
• Blue-chip/non blue-chip

The latter, especially, at the top end of the market Fiddes describes as 'Core' (prime properties) or 'Cor Blimey' (non-prime properties that suffer blight).

The London market will also be split, with international buyers looking likely to dominate. The usual flow of families radiating out to the home counties and beyond from London looks set to stall as depleted confidence gnaws away at those looking to leave the safety of London to start a new life in the country.  Meanwhile the country market which has seen price falls of 10% during quarter 2 and 3, anticipates further falls (particularly in the North and midlands)

2012 will be a challenging market:

• Be prepared for the irrational buyer and seller and for sales falling through
• The market will be confidence-driven; easily spooked by economic uncertainty
• Transaction levels will be similar to 2011
• Ambivalent sellers will flee the market, but there will be more "Have to" sellers
• The trend for renting (lack of mortgage funding and job uncertainty) will grow.

There remains a market for realistically priced houses and especially for farms and land. There are keen buyers out there who will buy when the deal looks right, but they are cautious: there is uncertainty for 2012 on the global plain and those who can afford to buy at the moment are also savvy, they read the economy carefully and share this view of 2012.

So for 2012 - the message from Fiddes is:

• Vendors: get in tune with reality and don't allow your house to languish outside the market level.
• Agents: get in tune too and stop over-valuing properties in the hope of a one-off buyer to pay an over-inflated price.
• Buyers: choose carefully and wisely - there is little stock to choose from, but don't expect there to be much more next year
• The exception: the 'one-off' trophy house, be it big or small, which ticks all the boxes will sell.