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Should I Sell My House Now or Wait?

2012-04-19T14:26:55+00:00

This is a common question among home-owners considering selling up, who are constantly weighing the balance of whether their home would fetch enough to move up the ladder, or to buy the home they need for their family, especially given the deposit requirements of the banks which are still much higher than they were during the up cycle.

Whatever way you slice it, the UK housing market is still not in great shape. Unless you have a prime address in Central London the price of your home will likely either have been stagnating or falling since 2010. That said, supply is still really low and despite the doom sayers doom saying we do appear to have left any major price corrections behind, for the moment at least, and it is unlikely that interest rates will be rising any time soon.

With those facts in mind, the only factor that is likely to make now a better time or a worse time to sell than any time in the near future, is the deposit requirements of the banks, which could bring more or less buyers, and/or make a difference in whether or not you can afford to buy again once you have sold. And in that vein, it is probably better that you go for it now rather than wait.

In January the Guardian revealed a strong resurgence in low deposit mortgages of 90% and 95% mortgages, amidst a general increase in deals available. But the article also cautioned that banks would likely tighten up again as the year progressed amid the weak economic backdrop.

However, if we look at the Moneyfacts website, which is where the Guardian took its data from, we see that the number of high LTV mortgages has continued to increase so far. In January the Guardian said that there were 41 95% mortgages on the market, up from 27 in 2011. According to Moneyfacts there are 61 95% mortgages on the market as of April. So, given that the economic backdrop could yet bring tightening on the banks part, now may well be the time to sell up and go for it.

Every Little Helps

When it comes to this balance, of getting enough for our home to buy our next one etc, then every saving helps. We no longer have to accept the 2% commission charged by high street estate agents, because there are now online estate agents, which offer much the same service at a fixed fee, or a much lower rate.

On top of that if you take the sole agency agreement with your agent, then you can also advertise on private sale websites, and if you find your own buyer then you will pay nothing to the agent at all. Look up dual-selling to find out more.

UK Rents Rise Across the Board in September

2011-10-21T22:17:35+00:00

Rents rose in all UK regions in September for the first time on record according to LSL property services in their latest buy to let index.

LSL Property Services might not ring a bell and you could doubt the validity of their data, but few of us haven't heard of Reeds Rains agency network, which LSL is the parent company of, and Your Move is also under their belt. In fact the data is based on a representative sample of 18,000 properties across the UK, which shows that the average rent in England and Wales rose by 0.7% to £718 per month, surpassing the previous record high of £713 in August 2011.

"With annual rental inflation at 4.3%, the average rent is now £29 per calendar month higher than September 2010. The average yield in September rose from 5.2% to 5.3%," the company told OPP this week.

"Record rental highs are now being experienced in London, the South-East, Yorkshire and the Humber, the East of England, Wales and the East Midlands."

Though rents are growing across the board, the good old north south expanse (divide no longer does it justice) is not being closed, although it is less pronounced in LSL's rental data than in Rightmove's latest asking price survey. According to LSL the largest rental increase was in the south East of England, with 1.8%, followed by the East Midlands with 1.1%. Meanwhile the west midlands and the north east of England saw rents grow by just 0.2% and 0.3% respectively. In London rents were up by 5.8%.

According to Rightmove's latest data asking prices grew 5.2% in London compared to the national average of 1.2%.

Speaking to OPP, David Brown, commercial director of LSL said:

"It's not just a regional phenomenon, localised to London and the South-East -- rents are rising across the board. And, in areas of high demand, competition is driving up rents at a faster rate than elsewhere -- but no region has been immune to the growing demand for rental homes from frustrated buyers.

"In many cases, buying a home is now cheaper on a monthly basis -- provided renters can get past the stumbling block of the substantial deposit requirements," says Brown. "But for the majority, saving a £25,000 deposit is a herculean task. As things stand, we won't see competition among prospective tenants diminish without a substantial expansion in the supply of rental properties available on the market."

UK House Prices Up 0.3%, Hip Hip Hooray, Hip Hip...

2011-08-10T07:59:42+00:00

I feel bad writing about what seems like a triviality given the rioting that is going on up and down the country, but I just had to. I read a report filled with glee that house prices had risen 0.3% month on month in July in the Halifax index, yet we all know deep down that the UK housing market is still in a whole heap of trouble, with hardly anyone buying or selling, and first time buyers -- the ones who do want to buy -- forced to rent because they are unable to buy.

The latest report from the Royal Institute of Chartered Surveyors confirmed this. Respondents to the latest RICS survey reported the lowest average number of buyers since the summer of 2009. They also reported house prices falling for the third straight month, albeit at a slower pace.

It is true what Martin Ellis (along with practically all market bulls) says, the record low interest rates are keeping demand stable at its low level, stable enough to stave off severe price falls against record low supply levels. But this is hardly what we want.

While we are under the illusion that this stability is a good thing, sellers aren't being forced to face facts and drop prices, so the number of buyers isn't going to increase, supply isn't going to increase, banks aren't going to be forced to better assist first time buyers, and this depression is just going to linger on. Not to mention what it is doing to the construction industry.

The only ones who are happy with the current status quo are landlords. According to tenant referencing agent HomeLet the average UK rental rate increased 2.2% in July, to the three year high of £767. The company put the increase down to the dwindling number of people in the UK able to buy their own home.

This is strange, given that housing affordability for first time buyers is at an 8 year high, again this is according to the Halifax, in its latest First Time Buyer Review. Yes, thanks to the low interest rate and price stagnation homes are technically more affordable, the trouble is raising the 10% (or more) deposit needed to get these wonderful affordable-rate-loans.

As I have been saying for the last 2 years plus, house prices need to fall further in order to get this market back on its feet. Yes, homes are more affordable than they have been for years, but if you take the low rates out of the equation, as deposit requirements are doing for most buyers, then this shows the true picture.

During the last crash house prices fell until the average price was 2.2 times the average salary, only then did the market recover and start to grow. The Halifax is still judging affordability on average prices of 4.0 times the average salary, and even then housing is considered affordable in only 48% of UK districts. Mark my words, the market won't recover until prices fall further, and if they don't fall directly, we will just have to wait till inflation does the job. Of course, with the government almost certain to let inflation ease our debt burden, that may not take as long as it should.

UK House Prices Set for Big Falls

2011-07-15T07:19:13+00:00

Well, it's been a while since I covered the UK housing market, or more specifically the situation with UK house prices. The last time I did I covered the modest house price rise in January, and repeated the same line; house price rises when homes are unaffordable are only storing up trouble for a bigger correction.

I have been predicting this bigger correction since prices stopped falling in 2009, and while prices have had their downs, they have been matched by ups in a picture of pure stagnation.

Currently "Demand remains subdued, but so does supply" is one of the bullet points on the Nationwide index for June, in which it recorded no change in house prices on the month, and a 1% decline on the year.

This follows the 0.3% growth in May, following a 0.2% decline in April, and this is pretty much how it has been trundling along since the second half of 2010. According to the Land Registry index, which is regarded as more accurate prices fell 0.4% on the month in May, and are now down 2.2% compared to last year.

The Land Registry is based on sale prices, so we are officially in decline, but many indices still tell of a balanced market, travelling sharply neither one way nor the other. Still I foretell a big drop in prices. Whether it takes six weeks or six years UK house prices need to fall by a great deal. Houses in the UK are too expensive.

Before the last crash (the crash before the recent crash), the Nationwide affordability index shows that houses cost an average 4 times the average salary when prices began to drop in early 1989 (as displayed in the Nationwide historical house price index), and they fell until that was cut to 2%. Before this crash the average house cost 5.4 times the average salary before prices started to fall at the end of 2007.

The average house currently costs 4.4 times the average salary according to the same Nationwide affordability index. So, even though we are 3 years into this so-called correction, houses are still unaffordable enough to trigger a correction. And that is before you even consider the lack of mortgage availability, and the massive deposits first time buyers are forced to raise, before they can even consider being able to afford a mortgage that they have only a slim chance of getting. No wonder rental demand is soaring.

I blame the government. No, I am not having an Alf Garnett moment, if the government had let the correction proceed unabated instead of throwing money at the problem, then it is at least possible that homes would be affordable to first time buyers again by now and we could hope for a sustained recovery now.

It is not just the UK government either, first time buyers are priced out of the market in Australia as well, but the government is determined to prevent a sharp drop in prices. In America the government stepped in to stave off the crash, and has only served to prolong the agony. The real question is, why are governments so intent on keeping house prices high? Is it something highfalutin like the balance of markets, or is it a conspiracy to keep the poor poor and the rich getting richer? You decide, and answer in the comments.

In-Deed Online Could Revolutionise Conveyancing in the UK

2011-06-17T14:55:21+00:00

This week, the UK conveyancing industry was rocked by the announcement that Harry Hill, the founder of the UK's largest property website Rightmove has launched a new online conveyancing service onto the Alternative Investment Market today (London's junior stock exchange) with a £2.9 million pre-IPO placement.

A further £1.6 million will be raised by the sale of 3.7m shares at 42p, with partners Hill (ex-chief of Countrywide estate agents before founding Rightmove) and Peter Gordon a former partner at Private Equity group 3i keeping a 10% stake each, and locked into their investment for a set number of years. Former Nationwide chief executive Philip Williamson and former Wall Street trader Boris Zhilin are non-executive directors.

The venture In-Deed Online allows people buying or selling a home to track the legal process from instruction to completion online, and joins AIM today with a market value of £8.6m. Other investors include Octopus Investments and fund manager Henderson, as well as Andrew Black, the co-founder of Betfair. He invested in the pre-IPO round in May at 42p and owns nearly 3% of the company.

With so many big-hitters getting behind this venture, and such financial firepower, In-Deed Online could potentially revolutionise conveyancing in the UK. So, one would expect the conveyancing industry to have one or two things to say about it. Well, while they undoubtedly are saying plenty, it would seem they are less-than-keen to air their comments. I tweeted: "Anyone in conveyancing ind. worried about the new In-Deed venture from Rightmove founder (Countrywide's) Harry Hill? - DM if you'd rather", to which I received only one response.

Fortunately that response came from @SurinderK, a PR who offered me comment from Eddie Goldsmith, Chairman of Conveyancing Association, to which I gratefully accepted and received the following statement from Goldsmith by email:

"News that Harry Hill's conveyancing venture In-Deed [Online] will be listed on the Alternative Investment Market should be welcomed. As an initiative from such a well know industry figure should act like a wake up call to those conveyancing firms that still believe that like the internet is just a passing phase, the conveyancing world is going to stay the same.

"The industry is facing a number of challenges and ahead of the Legal Services Act being implemented in October, I imagine we will continue to see a number of new businesses or approaches to property emerging. Rather than viewing these changes as a threat, existing firms should use this opportunity to improve their own business offering and services."

Two law firms: Breeze and Wyles and O'Neill Patient have already been signed up to carry out the conveyancing work under the In-Deed Online brand, and the firm hopes to sign 2 more. Gordon said In-Deed Online could potentially take stakes in the firms, providing them with capital to support their expansion to allow them to handle more cases.

"As far as customer service is concerned, conveyancing is still in the dark ages," he said. "We're not setting out to be cheap and cheerful - this is a high-quality service at a very fair price." A quick quote reveals the website charges £450 in legal costs, plus £90 VAT and £716 in other costs for a freehold purchase of £250,000.

In-Deed's ambitious goal is to become a market leader in the highly fragmented £1bn conveyancing market within three years. At present, no single firm controls more than 3% of the market. Its service features a price guarantee, a no completion - no fee promise and a team of regional property lawyers who commit to updating homebuyers every two days.

"I'm not very good at being second or third," said Hill. "Together with a team I built Countrywide from a small estate agency group to the largest of its type in the UK, and developed Rightmove which -- valued at upwards of £1bn -- is best in class."

Buy to Let Booming in England, "Up and Coming" Cities Like Hull

2011-06-02T09:05:25+00:00

I got a press release this morning in my email, and in the summary I read the words "up and coming cities like Hull". The press release was about the prospects for a buy to let boom in the city.

I lived in Hull between 1989 and 1995 and I would have called it down and falling rather than up and coming, we moved to escape the onset of drugs and violence that was seemingly taking over the residential area in which we lived, and all the surrounding residential housing estates that we knew of.

Looking back we now realise it wasn't just Hull, but that all cities were going through the same thing. Some people put it down to the recession and housing crash that started in 1989. Whatever the cause, obviously I couldn't resist scoffing when the press release called Hull an up and coming city, but this changed as I read the release.

It made me remember what a great city Hull really is. I knew this when I lived there and learned about the rich history of the docks, and saw the huge factories of the likes of Smith and Kline. Sure, the residential areas where going through the same problems that cities faced up and down the country, but Hull's docks will always make it a prosperous city, with good job opportunities.

The new investments that afford Hull its new "up and coming" status are two fold: the new £165 million Humber Quays development, which has now gained World Trade Centre status, and is adding new high-quality office space to Hull's waterfront, and the new £80 million turbine factory by Siemens.

To be built on 130 acres of Associated British Ports (ABP) land at Alexandra Dock, the Siemens factory is the largest industrial investment in Hull in decades. The factory could generate up to 10,000 new jobs in the region and will feed into the biggest wind farms the world has ever seen.
Alan Forsyth, Director of well-respected property investment company, Property Secrets and experienced buy-to-let investor, comments:

"It is due to the positive economic track record as well as future growth potential that we believe that Hull is certainly one city to consider as a lucrative buy to let market from a very affordable starting point. Fully refurbished properties can be secured at up to 20% below official RICS valuations with a minimum 7% rental return.

"We have many investors from other parts of the UK attracted by the positive cashflow, and affordable properties here - and are assisting many clients in buying up property portfolios generating passive income on a monthly basis."

Buy to let is reportedly booming across the north and the north east, according to Philip Nolan, owner of the Philip James estate agency.

"Landlords are having a field day in the north of England. In the first quarter of 2011 one of our Manchester branches witnessed two-thirds of its entire rental property stock rise sharply in value without a single property dropping. This is a record for Manchester and we expect the trend to continue throughout 2011 and into 2012," he said.

Housing Market Cheer or False Hope at Rising Prices and Loans

2011-05-01T23:02:01+00:00

I finally got round to reading an Express article I bookmarked at the end of last week titled HOUSING MARKET CHEER WITH RISING PRICES AND LOANS. The article is positively brimming about the double whammy of good news for homeowners as house prices and mortgage approvals were both seen rising in March.

According to the figures covered the statements are true, but when you look a little deeper you realise that anyone given hope by the news will only be getting false hope.

Firstly the 0.7% house price rise comes from Find a Property, which found prices up 0.3 per cent in January. As much as I would like to pour water on this, because Find A Property's index is based on asking prices only, I can't, because the data is very similar to that of the Nationwide index on a monthly basis.

What everyone who has bothered to pay attention knows is that price rises when homes are unaffordable to the majority of people are only ever going to be temporary, because they are pushing us closer and closer to a correction. In the current case this is even more true, because the wider economic picture does not seem capable of supporting house price rises.

Unemployment is still too high, VAT is higher than ever, the government's austerity measures will continue to bite, wages are frozen and the economy is still struggling to find growth. That is before we mention the lack of mortgages.

But mortgage approvals are rising? Well, they are and they aren't. Mortgage approvals for house purchase increased "slightly" on a month-by-month basis, according to the British Bankers Association report, which the Express quotes. However, according to the same report mortgage approvals for house purchase dropped 10% compared to last March.

The figures show that 31,660 mortgages were approved for house purchases in March. This is not only less than the 50,000 per month that a leading think tank's research found was needed to stop the market from falling, but way less than the 70-100k+ plus being approved each month in a healthy market.

I don't know about you but I am not breaking out the champagne to toast the recovery just yet.

UK House Prices: Not a Lot of Room for Hope

2011-04-20T20:42:24+00:00

The number of home buyers shot up in March according to the National Association of Estate Agents, who put the jump down to people trying to beat the Easter rush. Figures released by the body show that 290 potential buyers registered with estate agents in March, up from 268 in February.

However, in the same breath the Council for Mortgage Lenders has blown that house down with a report of yet another year on year drop in mortgage approvals. Mortgage approvals fell 2% year on year in March according to the CML. Optimists will cling to the 21% month on month rise, but this is simply a seasonal trend. Compared to the fourth quarter of 2010, the first quarter's 30.1 billion worth of mortgages represents an 11% decline on the quarter.

Nonetheless the CML spokesperson still managed to be "pretty" upbeat. CML chief economist Bob Pannell said: "The housing market has emerged hesitantly from hibernation. Household finances are under a lot of pressure, and as a result demand for house purchase loans fell in the first three months of 2011. Lenders expect mortgage credit availability to improve this quarter, and this should help to underpin house purchase activity, albeit at pretty low levels."

Pretty low? In the same article the Guardian quoted Jonathan Samuels, chief executive of Dragonfly Property Finance, who gave a very contrite viewpoint on the market:

"Consumers are worried about their jobs and the direction of interest rates, which will affect their already stretched finances, and so are putting the biggest financial commitment of their lives on hold. High street lenders, meanwhile, are still in hiding and are only opening their arms to flawless, equity-rich applicants. Unfortunately, two negatives in the mortgage world do not make a positive."

In short: hardly anyone feels confident enough about their jobs, house prices, interest rates or the economy to want to buy, and only a fraction of the few that do can raise a deposit, and only a fraction of those will get a mortgage. You don't have to be a clairvoyant to see a lot more house price misery in the near future.

FSA Backs Down on Mortgage Regulations, Rightfully So

2011-03-25T22:45:08+00:00

At last some good news for the housing market. Today the financial services authority scrapped its more outlandish, and according to some even draconian measures as cooler heads seemingly prevailed.

Revealing its business plan for 2011 and 2012 the FSA asking lenders to ensure borrowers can repay loans over 25 years "may not be appropriate". Nor do they now intend to ban interest-only loans.

The news will be a feather in housing minister Shapps cap, Shapps reverse-lobbied the FSA earlier in the year, applying pressure that the proposals were a step too far. He did however stop short of calling the proposals draconian, something which cannot be said for the Chartered Institute of Surveyors.

This is good news for the housing market though, albeit only a tiny bit. Let's face it; the mortgage market is pretty well self regulating now. After the kicking it suffered for its outlandish behaviour, the banks have learned their lessen and lending is tighter than it has been for a decade. They are even lending less to families than couples. The last thing it needs is such harsh regulations. This makes the FSA's current behaviour slightly laughable.

Where were these stringent regulations when banks were doling out 110% and 120% loans so every Tom Dick and Harry could buy an overvalued property in an area they couldn't afford to live? Nowhere, yet here they are trying to overcompensate for their failures by shutting the door to an empty stable. Time will tell where they are the next time the mortgage market really needs the bad medicine of stiff regulation.

Government's First Buy Scheme a Drop in the Ocean of FTB Misery

2011-03-23T23:59:56+00:00

For those of you that don't know, today was Budget Announcement Day in the UK, the day when the Chancellor of the Exchequer dances for us all, well, at the moment it is more like a walk along the tight rope.

Of particular importance for the housing market -- or so it appears -- is the first home scheme, replacing the Home Buy Scheme as the latest saviour for beleaguered first time buyers, that is the 1% of first time buyers that will actually benefit from the scheme.

The government has stumped up £250 million to fund a shared equity home buying program, whereby first time buyers earning £66k or more can buy a home with a 5% deposit, and a mortgage provided 50/50 by the government and home builders.

The government assures that the money is new money, not reallocated, and the scheme seems good on the face of it, but it is Campbell Robb, chief executive of Shelter who bursts the bubble.

"This first time buyers' package is the policy equivalent of a sticking plaster on a broken leg, and will have little impact on our housing crisis," said Robb.

"In fact today's announcement will help less than one per cent of those struggling to get on the housing ladder, leaving them more likely to win a prize on the lottery than be helped through this small-scale scheme."

Apart from that there was a common response: one small step for Osborne, one small step in the right direction for the UK housing market, with the emphasis on small. The industry still thinks the government can and must do more.

Sarah Webb, chief executive of the Chartered Institute of Housing, said: "The £250 million fund is a useful short term boost, but it is important that we also address the fundamental question of how to sustain housing supply in the long term.

"Measures to reform the planning system will have a more significant role in this."

Echoing Webb, David Cowans, chief executive of Places for People said:

"We are facing the severest housing shortage since the 1920s, so the government's new firstbuy initiative is a welcome step in the right direction, but will only go some way to helping house the nation.

"To make more homes more easily accessible we have argued that house builders need to look at greater tenure flexibility and offer a wider range of products and price points which people can move along, as their financial circumstances and personal aspirations change."

Meanwhile Ian Fletcher, director of policy at the British Property Federation says the government should be more conscious of making sure funding like this is also helping to bring growth and jobs into the economy.

"We would like to have a seen a refined policy which targets such aid at homes yet to built or completed, rather than a means of house builders selling unsold stock," he said.

UK Housing Industry Struggles to Get First Time Buyers Back in Market

2011-03-12T09:45:58+00:00

Among the property press releases I am receiving on the UK market there is a very common trend forming; developers are trying to lure first time buyers into the market. This is far from surprising, first time buyers are considered vital for a healthy housing market; they made up over 60% of all sales before the crash, now they make up less than 8%.

For the most part first time buyers can't afford properties in their area, if they can they can't raise a 5-10% deposit, and even if they can do that they can't get a mortgage. There are real fears that we will become a nation of renters, if something can't be done to help get the current generation's first time buyers onto the property ladder.

"First Time Buyer Properties Now Available At Merryfields

LEADING housebuilder Barratt West Midlands has announced the release of a brand new selection of two-bedroom homes at Merryfields - the five star housebuilder's popular Brierley Hill development - as the developer continues to meet the needs of the area's first time buyers," Reads one of the press releases.

"Dedicated First Time Buyer Event This Weekend At Bracken Gardens

BUYING a first home can seem like an expensive time, but this weekend Barratt West Midlands is inviting potential purchasers to its Bracken Gardens development on Armitage Road, Rugeley, where visitors could find out just how affordable it could be to buy a new home," reads another.

In the case of the latter, we have been hearing about dozens of similar events being held every weekend as every attempt is made to drag the market's lifeblood back, kicking and screaming in some cases.

On March 1st, both Barrat and its David Wilson Homes subsidiary issued a press release about the help they were offering first time buyers. West Midlands First time buyers could buy properties for just a 5% deposit, with the developer adding a further 15% in the form of a no interest deferred loan. However, the truth of the matter is, those that can raise a 5% deposit, will tend to be those well enough off to put down a larger deposit anyway, either on their own or with assistance from family.

At the moment, with unemployment high, job security low, banks tight and deposits of around £10k needed to even consider a mortgage on properties over 5 times the average salary, renting is not only the best option for many at the moment, but the only option.

No Bull, No Bounce, Just Falling UK House Prices

2011-03-08T22:41:32+00:00

I just read an article on UK house prices in the Financial Times and it blew my mind. Before you get excited, the reason it blew my mind is the fact that it was completely un-mind-blowing. There was absolutely nothing in the article that hasn't been said a hundred times before.

Basically it said UK house prices are heading for a fall because interest rates are almost certainly on the horizon, and because the austerity measures will raise unemployment. It misses out the lack of affordability and constrained mortgage market.

"House prices have already fallen for each of the last six months -- before either the austerity measures or higher interest rates have kicked in. Further sharp falls look inevitable when they do," concludes the article.

Countering this, the Royal Institute of Chartered Surveyors points out that while house prices maybe falling, that they have been falling slower and slower for the last 4 months. And Acadametrics -- who it has to be said present balanced information for the most part -- point out that house prices are currently just 5% below the peak.

When you look back through 2009, when prices were rising, the bears continually repeated the same spiel, mortgage market constrained, wages frozen, unemployment high and likely to rise, austerity cutting demand and raising supply, all of which should have brought prices crashing down in a second dip.

Meanwhile the bulls and the fence sitters continually said that low interest rates would continue to support the market. But now, that defence is starting to come to crumble. The markets are expecting a 75 basis points rise. This would add 8% to mortgage repayments, making the average monthly payment £722. This will not help the housing market one bit. In fact we will likely be looking at a resurgence of underwater loans, arrears and repossessions.

We could see a fire sale as people try to get out of mortgages they can no longer afford, and this will certainly become part of the pile of reasons for house prices to fall. Of course house prices are already falling, as we said, house prices have fallen for the last 6 months straight. And not just at a moderate rate, in fact in 2 of those 6 months we have seen record falls.

According to Halifax house prices fell 2.8% in the year to end this February, the biggest year on year fall since October 2009, and just 5 months after the record 3.6% month on month fall recorded by Halifax in September last year. So, house prices are heading down, and there is little reason to suggest them heading back up anytime soon.

More and More First Time Buyers Becoming Long Term Renters

2011-02-15T23:40:35+00:00

A recent survey by leading UK property website has shown that first time buyers are now responsible for less than a quarter of UK home buyers, at 22%.

Miles Shipside, director of Rightmove, said: 'The level of first-time buyers dropping below one-in-four of all prospective buyers is a big concern for the property market.

'The desirable level of first-time buyers for a healthy market is typically around 40 per cent of all buyers, almost double the current level, as they perform a vital function in completing chains and aiding fluidity throughout the housing ladder.

'These findings are likely to heighten government concerns about the scarcity of first-time buyers and it is imperative for the long-term health of the market that a solution to this issue is found.'

This is true, in fact the government has just held a meeting with some of the biggest hitters in property to try and come up with a solution to the problem.

But, Matt Griffith, of the campaign group Priced Out told the government, -- the same-old solutions that are brought out and waved around at times like this --, shared ownership schemes or encouraging banks to make risky loans would not be solutions.

He said: 'The fundamental problem is that house prices remain too high.

'Encouraging first-time buyers to take out large loans now is taking advantage of young people's vulnerable financial state for a short-term political boost.'

The home builders are certainly trying to do their bit. This week the press releases I have been sent have contained details of several first time buyers events at various new developments up and down the country.

They too will need some creative solutions if they are to bring some signatures from cash-strapped first time buyers.

House prices were over-valued when the crunch hit. But ironically they are even more over valued now with the Halifax index putting the average house price at over 5 times the average salary, a sight more than the long-term average of 4 times, which is arguably still much too high.

First time buyers need to find a 5% deposit, at current prices that is £8,000. With unemployment running high, austerity hitting low, pay-freezes, possible rate rises on the horizon, and lending criteria tightening still, it is easy to see why more and more first time buyers are becoming long-term renters.

A Look at What 2011 Has in Store for UK House Prices

2011-01-06T21:45:10+00:00

Sorry it has taken me this long to get pen to paper on the 0.4% rise in UK house prices recorded by Nationwide to end the year. This left prices up 0.7%, proving right the common prediction that prices would end 2010 much as they started it; that as much as weak demand would apply downward pressure, supply constraints would redress the balance.

That said, another way of looking at the balance is prices rose in the first half of the year and fell in the second, barring regional differentials. The 0.4% month on month rise aside, in the quarterly measure -- which is regarded as more accurate -- prices continued their steep decline; falling 1.3% in the final quarter.

With VAT now at 20%, a slue of other cut backs either in effect or about to come into effect, public sector jobs still to go, and the ever-present fear that rates will need to start heading back up soon as well, those predicting that 2011 will be another largely flat year for UK house prices could well find themselves in for a shock.

The prediction is the same as it always is during down-jaunts, that the constrained supply of this tiny-island we live on will keep the falls from being too drastic. But prices have fallen throughout the second half of 2010 because the incoming coalition government abolished HIPs leading to an increase in supply. Millions of public sector workers getting paid off all at the same time looks bound to tip the balance further and bring more falls.

I agree that the falls are unlikely to be as harsh as in 2008. At the time we saw an unbelievably drastic reduction in confidence, at the same time as the mortgage tap went from a strong flow to a trickle, and millions of investors started trying to get out before the fall. That said I really don't see how the market can survive the weight of downward pressure that it has coming. London will likely be resilient, as well the south, but I am practically sure that the falls in the rest of the country will be sufficient enough for a 5 - 10% fall overall.

UK House Prices: Where are we Now?

2010-12-04T22:00:16+00:00

Apologies to my regular readers for the delay between posts on UK house prices, but I started to feel like I was just saying the same things over and over again. To be honest what I say here will not be very much different.

The government is still dragging out the austerity measures, especially the millions of public sector job cuts it has said it will make. If the government cut 5 million public sector jobs it would be terrible for the housing market, but probably a bit better than 15 million public sector workers living in fear and uncertainty about their employment future -- a state that few people look to buy a house in.

Mortgages are falling, and according to most indices, including the Land Registry, Nationwide, Halifax and Hometrack prices are falling as well. Nationwide said house prices were down 0.3% on the month in November, but what is more significant is that the year on year gains, which scaled the dizzy heights of a 10% gain in April this year, is now down to just 0.4%, down from 1.4% in October.

The index showed a 1.3% contraction quarter on quarter. The Halifax says prices were also down 1.3% in the three months ending October compared to the previous 3 months. This was in an other wise positive month, when the 1.8% month on month rise failed to make up for the 3.7% record contraction seen in September.

Few people are now denying that UK house prices are going through the foretold second-dip -- foretold by many analysts ever since prices started rising in April 2009. Instead of admitting defeat the market bulls have gone back to talking about how foreign buyers are fuelling rising prices in the south west and central London, much like they did during the first dip.

You would be forgiven for thinking I am happy that we are in a second dip. I am not happy for any homeowners that go underwater with their loans, not for any builders that go out of business (though I don't think it will go that far this time), but I am also not happy that first time buyers are still priced out of the market in the UK. Property is overvalued and, with no HIP or "wait and see" attitude to restrict supply, this is the correction -- part II.

UK House Prices: A Second Dip Looks More Inevitable than Ever

2010-10-01T09:24:45+00:00

UK house prices are continuing on their psychedelic journey through unpredictability; the odds continuing to stack up against them rising, and the continuing to rise against all odds. However, this time it really does seem like the run is going to end, and a second fall is going to happen.

Bears, along with many pundits, analysts and commentators have been predicting a second dip ever since prices started rising in March 2009. But prices have continued to grow.

Last year the growth was fuelled by tragically weak supply. As the market improved, demand also started to grow, with mortgage approvals going as high as 50k per month, which was high for the market but nothing compared to peak or even normal market conditions.

Since supply started rising when the incoming (and some would say incumbent) coalition government abolished the Home Information Pack, the pundits have increased their calls that a second dip is inevitable.

The government is also planning to cut millions of public sector jobs, which will further increase supply and drop demand. In fact it is already doing so. No one wants to buy or sell their house when their job might be on the line. Worse, because of the government's dilly dallying, many more people than those who will lose their jobs have an imagined axe above their head. As a result, mortgage approvals have been falling for the past few months.

Each time an index comes out showing a fall, the pundits think that this is the start of the second dip, but then more rises are recorded by another index. The latest conflict was Hometrack, which revealed its several consecutive monthly price drop, and the Land Registry which said prices climbed 0.3% in August, and 6.7% in the year ending August.

So far fear of public sector job losses will be keeping down supply, and along with low interest rates, bolstering prices. But when the jobs are actually cut there is a real possibility that a flood of homes will start coming onto the market.

Worse, today the Bank of England said it is toughening the criteria on mortgage lending. The tightening of the mortgage market was a large part of the reason why the UK housing market crashed, and this, on top of everything else makes a second dip look more inevitable than ever.

First Time Buyers Can Afford the Mortgages they Can't Get - What?

2010-09-14T22:12:27+00:00

First time buyers accounted for only 34% of UK house sales in July, down from 38% in June, according to data from the Council of Mortgage Lenders.

Though the data showed a 6% rise in mortgages for house purchase, the number is still far too low to bring hope or confidence to a fragile market, and the 2% drop in mortgages to first time buyers more than tips the scale into negative territory for most analysts.

The data did say that low interest rates mean average repayments are only 13% of First time buyer's salaries, the lowest percentage since early 2004. Homes and mortgages are definitely affordable for first time buyers, it is just a shame most of them don't have a sufficient deposit to get a mortgage -- 24% was the average deposit paid by first timers in July.

It is one of life's great ironies that first time buyers could get mortgages when they could scarcely afford the repayments, and now the repayments are manageable they can't get a mortgage. And don't even get me started on the fact it was bank's giving people mortgages that would take 90%+ of their disposable income that caused the madness in the first place.

Everyone keeps coming back to the same thing; here is a statement from the Guardian's coverage of the CML data, a Brian Murphy head of lending at independent mortgage broker Mortgage Advice UK:

"With public sector cuts and tax hikes around the corner, inflationary concerns and constant doom-mongering about a double-dip recession, buyers' confidence is hardly robust."

Yet Halifax is still showing prices rising, there is still the possibility that low interest rates will sustain prices, if only in flat territory. Rents are also rising, which, along with price reductions and low interest rates is propelling buy to let landlords and business to buy property in increasing numbers. The outcome of (this madness;) the current set of circumstances is that Britain could develop a renters culture, which could leave us with a more manageable, if not saner housing market -- maybe I'm a fantasist.

UK Housing: Government Unlikely to Help First Time Buyers

2010-09-10T08:07:37+00:00

House Builder Redrow has called on the government to do more for first time buyers. The Redrow chairman has stated that currently, first time buyers are having to find deposits of 20% and more. This, as well as being way above the long term average 6% is also a bridge too far for most first time buyers.

"We are not blaming the banks," he said. "This comes down to Basel III and the restrictions on their balance sheet."

He urged the Government to set up an insurance indemnity scheme for first-time buyers to ease the problem, or provide tax breaks.

It is unlikely that the government will take any notice. We don't need Redrow to tell us that first time buyers are struggling, but the stimulus of the housing market is over and we know that this government is keener to cut spending than increase it.

Banks are likely the best chance first time buyers have of being able to buy in the UK again. It is ironic that during a correction that should have made it easier for first time buyers to get on the property ladder, the banking system was hit so hard that it has actually gotten harder. Unfortunately you can't see any change from the banks until a few years down the line, when confidence has increased greatly, as well as profits from international investments.

Until then first time buyers will just have to rent and save.

UK House Prices Proving Unpredictable, but Maybe...

2010-09-09T09:20:55+00:00

Well, it is starting to look like the bulls have been right again. Halifax has just revealed a 0.2% price rise in August, following the rise of 0.7% in July. Or is it; according to Nationwide prices fell 0.9% in August after falling 0.5% in July.

The fact that those two -- very similar in terms of how they measure prices -- indices are falling more out of sync now than they have been since the crash started is only adding to the uncertainty that people feel for the UK housing market.

Halifax economists believe that low interest rates will sustain the market throughout the austerity and impending job cuts. They believe the market will be near enough flat this year. Because the combined rise in the last 2 months more than cancels out the falls in May and June, and that is how it has gone so far in this year. This makes it look like Halifax could well be right.

Meanwhile, after falling between February and March, the Land Registry index showed a strong growth of 0.4% for July after being almost flat in June. The Land Registry is also reporting transactions falling, which contradicts the price rises.

On top of that mortgage approvals fell again in June, from 34,574 mortgages approved for house purchase in June, to 33,698 in July. Not a massive fall, but part of a slide that has lasted several months from a high of almost 50,000 mortgages being approved per month. The worst thing is that even at nearly 50,000 mortgage approvals per month it was still short of the 20,000 properties being added to Rightmove every week.

But low and behold, prices are continuing to rise aren't they? Well, yes they are, except of course according to Nationwide.

Nationwide matched up with the Land Registry in falling 1% in February, but then bounced around 1 % growth for March and April, which is when its decline began. In May prices grew only 0.4%, and flat lined in June, before the 0.5% and 0.9% falls mentioned for July and August.

The truth is that the housing market has now proven itself unpredictable. For many months now there has been plenty of things to put plenty of pressure and push prices down, but some mystical force seems to combine with low interest rates to pull it through. All that time though, mortgages were rising, with mortgage approvals now falling, perhaps that run is coming to an end.

UK Housing Market: No One Wants to be a First Time Buyer

2010-08-30T19:09:47+00:00

No one wants to be a first time buyer in the UK right now. Apart from those wealthy enough to have 32,000 or more lying around in cash, practically everyone else has given up on getting onto the property ladder and set about trying to make lives for themselves in private rented accommodation.

During the boom, first time buyers could buy on a 100% mortgage. But as prices rose the disposable income that first time buyers were left with was less and less, one unplanned night out and it was mortgage arrears city. At this point less and less could afford to buy at all, the financial crisis was simply a catalyst for a house price crash that was becoming inevitable.

Normally during a correction house prices fall until first time buyers can comfortably afford to buy again. The correction in the 80s lasted six years. This gave first time buyers plenty of time to save, and they could buy comfortably when prices came down into their bracket.

This correction was different: because the recession was a bigger and bolder hit, the government feared that a wave of repossessions like that seen in the 80s would send the UK economy into a death spiral. During the 80s crash homeowners did the same as in this one, battened down the hatches. But the waves of repossessions kept supply up and prices heading down. Thus, by staving off the repossessions the government's efforts cause supply to constrict and prices to stabilise far more quickly.

This was good news for the economy and great news for struggling homeowners, but terrible news for first time buyers.

Not only did prices stabilise and start rising again long before they had become affordable to average first time buyers. But they could no longer throw their lives into a 100% mortgage because now the banks want 10% deposits, and 20% is necessary in most cases, either to get a mortgage or to be able to afford the repayments on the mortgage.

Before if you were earning enough to make mortgage repayments on a 100% mortgage (disposable income aside) the chances are you could buy a house. Now you need to be earning enough to buy a house -- at around the same price in many areas -- and to be able to lay your hands on 10 - 20% of the purchase price, between 16 and 32000 on the UK house price average.

With wages mostly either frozen or falling and austerity biting it is easy to see why no one wants to be a first time buyer in the UK right now.

UK House Prices: Can We Really Avoid a Second Dip?

2010-08-25T21:49:29+00:00

According to Nationwide, UK house prices fell 0.5% in July, slowing the annual growth rate to 6.6% from 8.7%. Worse than that now mortgage approvals are falling as well. I had started to doubt my firm believe in the inevitability of a second dip; maybe low interest rates would continue to support the market? Now though, with mortgage approvals showing that demand may not be so underpinned I am getting back out my wooden spoon and giving it a stir up.

Throughout the duration of rocky periods experienced since prices began their near constant rise last March; every time it looked like the beginnings of a second dip, bulls could always point to still-rising mortgage approvals as a positive indicator. Not anymore.

My readers know I have been an avid believer that the weak fundamentals supporting the growth, combined with the fact that the correction had not corrected the severe over-valuation of UK houses, made a second correction inevitable, but even now, when there is mounting evidence to suggest we are in it, many analysts still believe that the market can survive.

Take the last Halifax index for July; the Halifax housing analyst Martin Ellis said that while increased supply from things like the abolition of HIPs had relieved the upward pressure on prices, that low interest rates, and the economic recovery, by underpinning demand, would support the market sufficiently to keep the line flat rather than down.

That said: Halifax found a 0.8% increase in prices, compared to Nationwide's 0.5% decline and also highlighted a 2% rise in mortgage approvals. With mortgage approvals now falling according to the British Bankers Association, demand could prove to be less underpinned than Mr Ellis thought. Further, the economic recovery, another factor mentioned by Ellis is looking less peachy than it did a few months ago.

We are struggling to bring inflation down, and struggling to get growth up. With the austerity incoming, can we really expect growth to accelerate? If all that weren't bad enough we have millions of job losses to come in the public sector, which will undoubtedly affect jobs in the private sector, as the newly unemployed or job-fearful cancel building work and leave the car service for a bit longer.

All in all there is more reason to believe we are in for a house price dip than there has been since 2008, and, as we all know, that is saying something.

But of course, we have been here many times before; with me and countless others continuing to provide countless reasons why a second dip was just around the corner, and all the while that dip never coming. Time will tell if this time is indeed any different.

Second Dip in UK House Prices to be a Long One Says PWC

2010-07-13T08:55:31+00:00

Accounting firm Pricewaterhousecooper has issued some very negative predictions on the future of UK house prices. According to PWC, there is a 70% chance that UK house prices will still be below peak 2007 levels in 2015 -- in real terms. This is despite a continued and expected recovery.

Further, PWC also believes there is a 50% chance that real house prices will still be below 2007 levels in 2020 could be below 2007 levels. Aside from the fact that this is the first prediction in percentages I have seen, I not only agree with the scenario but am 100% rooting for it.

According to recent data by the Global Property Guide, UK property is currently over 20% overvalued. The was confirmed by the Nationwide's latest affordability index which showed the average house price is currently 4.4 times the average first time buyer's salary, compared to the long term average of 3.3.

House prices need to come down. We are currently in a very difficult time for the housing market, what with the government cut-backs imminent and loans scarce and expensive, it might be a good idea to get rid of the overvaluation now and move on.

Not that there is much doubt in my mind about whether prices will fall or not, for me it is now a foregone conclusion. Pretty much everyone is in agreement that supply is currently rising and demand is currently falling:

Rightmove recently said that supply increases accelerated by 20% upon the announcement that HIPs were to be suspended, and now the latest housing market survey by the Royal Institute of Chartered Surveyors has also found that the "net balance" of properties coming to market has risen to the highest level for three years. RICS also said that demand is falling, with 5% more chartered surveyors reporting a fall than a rise (down from a positive 8% in May).

Prices are already falling, the Land Registry recorded a 2% drop in May, and Halifax recorded its third consecutive monthly fall in June. Looks like the much talked about second dip is upon us, and that UK houses may finally come within reach of first time buyers -- those who can stump up a 10% minimum deposit that is.

It Does Not Look Good for UK House Prices

2010-07-04T22:11:33+00:00

Well apparently the tide of opinion has changed on UK house prices, or rather the direction in which they are likely to go in the near future. Most analysts now believe prices will fall this year, and many believe they will fall next year as well.

It does seem like things are now conspiring against the market: supply is rising rapidly and set to continue doing so and the pound is strengthening bringing the exodus of foreign buyers. On top of that homes are still unaffordable to the masses, and we don't know -- for sure -- when the government will raise rates. Indeed it doesn't look good for the housing market.

The Telegraph quoted a few of the bullish analysts -- some of whom, if I'm not mistaken recently appeared in articles predicting further rises, or certainly the bodies they represent --:

Ed Stansfield of Capital Economics said: "Low interest rates should be supportive for house prices. But public sector job losses, tax rises and spending cuts will squeeze household incomes further, as well as denting confidence.

"What's more, the uncertain outlook for mortgage funding means that the availability of mortgage credit is unlikely to improve and could even be tightened again later this year. Given that the market remains overvalued, I suspect that house prices will end 2010 down by 5pc and will drop a further 10pc in 2011."

Hetal Mehta, the senior economic adviser to the Ernst & Young Item Club, said: "It is not looking good for the housing market ... we may be at a turning point." Howard Archer of IHS Global Insight said he would "not be surprised" if house prices were flat overall for the rest of this year and Peter Bolton King, the head of the National Association of Estate Agents, predicted a similar outcome.

As many of you will know, I have always believed a second correction became inevitable when the last one ended; a correction is meant to correct overvaluation, but a combination of weak supply, the stimulus -- low interest rates and buyer incentives -- and foreign buyers brought in by the weak pound prevented this one from doing its job -- houses in the UK were still overvalued when prices started to rise last March.

Now it is judgement day: supply is rising because of the abolition of HIPs, and likely to increase further as the government goes from no-stimulation to cut-backs threatening millions of public sector jobs, on top of that the pound is strengthening taking foreigners out of the equation and finally Nationwide has recently released its house price to earning index showing the average house price to be 4.6 times the average first time buyers salary, well above the long-time average of 3.3 times.

When prices started to rise last March, it was like circumstances had conspired together to bring respite to the market. Well now the opposite is true, almost everything is now pointing to prices falling. Even mortgage approvals are falling again:

Mortgage approvals turned positive long after prices had started rising, at which point both weak supply -- the other factors -- and rising demand were supporting the growth. Of course, even when mortgage approvals were at their peak they were still below the long-time average, and supply was still the main driver of growth. So now, it is supply rising which is the biggest concern.

According to the Rightmove index of asking prices supply increase 22%, from 27,235 houses coming onto the market each week in May to 33,149 houses coming onto the market in June. According to the British Bankers Association 36,709 mortgages were approved for house purchase in May, which is approximately 8470 each week, well short of the number of homes coming onto the market **. So, with supply likely to continue rising as the government cuts jobs, and demand unlikely to rise and maybe even fall depending on when the government raises interest rates (that's another story altogether) it certainly does not look good for the housing market.

**The BBA stats are only on the high street banks, but this is where most mortgages come from, and the BBA stats have always been closely matched to other bodies including the Council of Mortgage Lenders.

Will New Govt Affect UK House Prices?

2010-05-15T15:27:52+00:00

I thought it was about time I put pen to paper on the difference that I think the election will have on the UK housing market. Some could argue that I am just a tad late, but others will agree that I am right on time.

The latter is true, because the new government, a Conservative/Lib Dem coalition has not long become a reality, and, according to analysts, the property market will likely be an area that their coalition is particularly close on. This will either be very good for the housing market recovery or very bad, with a close coalition passing housing legislation swiftly, there is certainly little chance of things remaining the same.

There has already been evidence to support this, the abolition of the Home Information Pack, one of the best intentioned pieces of legislation ever, with the poorest implementation ever.

Those reliant on property sales to make a living, including most prominently the Royal Institute of Chartered Surveyors and the National Association of Estate Agents have long called for the abolition of HIPS, saying that they were slowing the market at a time when it could least afford it. These calls intensified after the government made having the pack mandatory before a home could be put on the market. So, it will be interesting to see if the removal of HIPs does indeed accelerate home sales, and, out of that, what effect the acceleration would have on the fledgling recovery so based on weak supply.

Then we have the reports that a Bill to make it easier for people living in social housing to move around the country could be one of the first pieces of legislation tabled by the new government. A source close to the Conservative Party's housing team has said that the bill would include making it mandatory for social housing landlords to keep a portion of their accommodation vacant for people wanting to move in from elsewhere in the country. The source said that they are considering having the legislation announced in the Queen's speech.

This will hardly please landlords, who are thought to have been a core group behind the Conservatives in hopes they would act favourably towards the property investment industry.

In my opinion, the new government will have very little effect on the housing market in the short term, because, in my opinion we are heading for a second crash and there is nothing anyone can do about it:

Homes are still unaffordable for first time buyers
Very few first time buyers or otherwise can raise a big enough deposit
Mortgages are still scarce even for those who can
Unemployment is still high and we are facing massive public sector cutbacks

Need I go on? Answers in the comments.

UK House Price Rises – Unsustainable or Flipping Great?

2010-05-02T19:11:41+00:00

The UK housing market, and the reporting on it never cease to amaze me. The latest is that Nationwide has reported that house prices are now over 10% higher than they were last year, the first time year on year growth has broken into double digits in three years.

This, says the Times suggests that confidence sis returning to the market, before covering everything else that suggest an upbeat housing market. Meanwhile the Guardian says that the growth is unsustainable, because it is based on low interest rates and weak supply, neither of which will last indefinitely and also because the growth since last March has pushed the average house price up to 5.5 times the average income, well above the 4x long term average.

I am with the Guardian, and have been saying the same since the growth began last March. It is clearly being shown as being unsustainable now however, by irrefutable evidence.

According to the Rightmove index for April, 25000 homes have been coming onto the market every week for the last two months, that is 108,000 per month. The British Bankers Association data tells us that only 34,905 mortgages were approved in March, an increase on the 33,360 approved in February, but well short of the 6 month average of 40,000. So, failing an unbelievable increase in mortgage approvals, this increasing supply does not bode well for the growth, which as was already covered has been partially fuelled by weak supply.

Thank fully the madness seems to be coming to an end. The Land Registry house price index, which is widely regarded as the most accurate registered a 0.6% decline in March, contradicting the data given by the lenders. The Land Registry has not shown a couple of monthly falls in the past 6 months, but returned to growth the following month. With supply increasing at the rate it is and mortgage approvals down, one has to suspect that this time will be different.

Mortgages Up but Still Subdued, UK House Prices Teetering on the Brink?

2010-04-28T19:00:12+00:00

Mortgage approvals for house purchase rose again in March according to new data. The latest figures from the British Bankers Association say that 34,905 mortgages were approved for house purchase in March, up from 33,360 in February. This is an increase of almost 5%, but it is still well short of the 6 month average of 40,000 and even further short of the level necessary to sustain a healthy housing market.

What's worse is the rate at which supply is increasing is accelerating according to the UK's largest property portal Rightmove. In its April index of house asking prices the portal said that 25,000 properties have been coming onto the market every week for the last 2 months. That is over 108 thousand properties coming onto the market every month, against only 34,000 mortgages being improved.

The Rightmove index reveals another worrying trend: sellers are continuing to increase their asking prices. In April those adding their properties to Rightmove were doing so at an asking price 2.6% higher than those adding their properties in March.

I have pointed out the weaknesses of the Rightmove index many times, not least among them is the variance in properties being added, and their locations, but it is what it is and we have to accept it as some indication of asking prices, which continued to rise almost constantly throughout the crisis.

Supply shortages have been the main contributory factor behind the rises in UK house prices seen since last March. Before this the gap between sellers' and buyers' expectations in a buyers' market compounded the devastated mortgage market to cripple sales.

Now we have supply increasing and rising asking prices threatening to widen the gap between buyers' and sellers' expectations, which will already be a void compared to last March because of the price rises. Forgive me for repeating what I have said many times, but can we really believe we have seen the last of this housing market correction?

UK GDP Q1 Growth 0.7% Quarterly and 0.3% Annually

2010-04-23T09:28:47+00:00

UK gross domestic product has grown 0.7% this year compared to the final quarter of last year and 0.3% compared to the first quarter of last year.

This UK economy was the last to emerge from recession out of Europe's developed nations, with a 0.4% growth in the final quarter of last year. So for it to continue into this strong growth, when many economies flat-lined or fell back into contraction, is a massive pat on the back for the UK government and will no doubt be used in the election campaigning.

In fact, if this growth is not revised down as it so often is, the UK may actually be seen to be recovering more strongly that the likes of France and Germany.

Eurostat hasn't revealed first quarter figures yet, but in Q4 last year, both France and Germany were still severely contracting on annual basis and Germany dropped off to zero percent growth on a quarterly basis.

UK House Prices Shaky as Election Fears Push up Supply

2010-04-13T09:54:17+00:00

UK house prices could be in for a bumpy ride as estate agents report a scary 6% increase in houses coming onto the market in March. This, the third consecutive jump in the number of houses coming onto the market, and, according to agents is representative of pre-election jitters in the home-owning community.

The rise in UK house prices, which began in March last year, has been primarily as a result of drastically weak supply, with rises in demand getting bigger as time progressed but never big enough to support the growth that was being seen.

Now that supply is rising it is highly likely that the falling prices recorded by the Halifax and Nationwide in January and February could become a downward trend lasting the entire year -- or at least half of it.

That said: the Land Registry index is still showing positive growths. The Land Registry must be called the most accurate equally when it is disagreeing with my theories as when it is agreeing with them. Further, I was predicting a second correction for most of last year and prices never turned negative again. You'd think I would give up wouldn't you?

Regular readers of mine will know why I don't: the credit crunch scenario is only one reason behind the UK housing correction. Another is the fact that prices became inflated and unaffordable for a large majority of the population -- in short: a correction was necessary and to do just that; correct the problems the market's growth had given birth to.

However, prices started growing long before the situation had been corrected, long before properties became affordable for those most in demand of them. In this, a further correction became inevitable as far as I am concerned, and for every month that it didn't come I held out that if it doesn't happen now or soon, we are only storing up trouble for the near future.

Now, with supply rising it looks like the first half of 2010 could be that near future. Election uncertainty could easily put pressure on demand as well as increasing supply. Then, no matter who gets elected we are looking at cuts, with one party likely to make more severe cuts than the other, either way these cuts will undoubtedly further affect demand, and likely further increase supply as well -- one way or the other.

Like I said, I have said this many times before and it has yet to come true. Only time will tell if this time is any different.

The Latest on UK House Prices in 2010

2010-03-29T00:26:36+00:00

Well, a few interesting things have happened since I last put pen to paper on UK house prices, well, 2 really, to be precise.

Firstly, the Land Registry issued its house price index for February, which confirmed the fall recorded in the indices of Nationwide and Halifax. The Land Registry index -- which is based on actual sales, not mortgage approvals like those of the lenders -- said prices fell by 0.3% in February. This is a fair bit less than the falls of 1% and 1.5% recorded by the lenders.

Secondly the Chancellor of the Exchequer, Alistair Darling revealed his 2010 budget, in which he once again raised the threshold of stamp duty on house purchases. Before the credit crunch, anyone buying a house for more than £125,000 would pay 1% of its value in stamp duty. By way of "stimulating" the housing market the threshold was raised to £175,000 in late 2008. It was dropped back down to £125,000 January 1 2010.

Now and for the next two years first time buyers will pay no stamp duty will be paid on any property bought for less than £250,000. There have been two main responses to this so far as I can gather:

One and the main (for me) is the uncertainty over how this is going to be regulated, the room for fiddling it is potentially huge. No one who has previously owned a home in the UK or abroad will be eligible, but I may have oned and my new girlfriend hasn't so she will be the buyer, and others have asked about people who have changed their name by marriage or by deed poll etc, not to mention the problems with finding out about ownership overseas.

The other is the fact that houses that are worth £251,000 - £260,000 have effectually had their values cut to £250,000.

Problems with regulation aside, I think that raising the stamp duty threshold for first time buyers is a good move, because it is this buyer group, which has still been struggling to afford the first rung on the ladder -- largely because of the hefty deposits needed to get finance. While the value of homes just over the threshold have effectually lost value, first time buyers have effectually been given £1,250 - £2,500 to add to their deposit savings.

I am not gonna even say that this could have a big impact on the housing market, because I personally think houses are still over-priced on average in most of the UK, but it could certainly have some kind of impact on the market.

Mortgage Approvals Creep Up in Feb Says BBA, What Of UK House Prices?

2010-03-23T16:21:41+00:00

Mortgage approvals crept back up in February, according to the British Bankers Association, after the 23% fall recorded by the organisation in January. A total of 35,276 mortgages were approved for house purchases in February, which is a slight improvement on the 35,124 approved in January, but a long-way short of the peak reached last December of over 45,000.

Howard Archer, chief UK economist at IHS Global Insight, said the BBA's figures "reinforce our suspicion that house prices will be erratic and prone to corrections in 2010, and will probably be no better than flat over the year".

He added: "If more houses come on to the market and buyer activity is muted, then the demand-supply balance will move significantly away from vendors and weaken their pricing power."

This lull was expected in the first part of this year, because the low-end buyers pushed their sales through to avoid paying stamp-duty on properties below £175,000. That threshold was cut-back down to £125,000 from January 1st.

None the less, with supply now increasing faster than demand according to the Royal Institute of Chartered Surveyors, prices falling according to the Halifax and Nationwide, and the general sentiment of the market changed, it is hard to see where the necessary energy is going to come from to turn the market positive again.

It will be extremely interesting to see what the indices of the Land Registry and government indices say. The former is due out on the 26th of March, at 11:00 am, watch this space.

Mortgage Approvals Inch Back up in February

2010-03-19T20:30:46+00:00

Mortgage approvals crept back up in February, with a 6% increase on January's figure according to the most recent figures to be released by the Council for Mortgage Lenders. The figure was still 6% lower than in February the previous year.

Mortgage approvals fell in January, ending months of rises. The Royal Institute of Chartered said that supply has increased faster than demand in January, and again in February. These were two warning signs that the market could be starting to turn down again, and this was further fuelled when Halifax and Nationwide said prices had fallen in February. Now we're apparently riding the rollercoaster back up a bit.

CML economist Paul Samter said he expected to see signs of improvement as confidence in the economy grows, but he added: The need for the authorities to address the fiscal deficit will inevitably slow the economy. At the same time the funding markets, while certainly better than a year ago, remain difficult and will limit the flow of available housing finance.

"Given the short-term weakness and distortions in the housing market, as well as more properties coming on to the market, it was perhaps unsurprising to see falls in some of the monthly house price indices in February. With activity unlikely to pick up much in the short term we would expect to see continuing price fluctuation in the coming months."

Andrew Montlake, director of independent mortgage broker Coreco, agreed with Samter, but further said that the upcoming election would likely subdue lending: "We are not expecting borrowing levels to accelerate significantly in the run-up to the general election, and they may even fall back slightly post-election. Come the second half of the year we will know far more about how the mortgage and residential property markets are likely to fare in the short term.

"While it is considerably easier to get a mortgage than it was a year ago, it is still considerably more difficult -- and rightly so -- than three years ago. There has been a slight improvement in product availability and rates in the 80%-85% loan-to-value range, although at 90% LTV the market is still very limited."

Mortgages Fall by Half in Jan, Another Nail in UK House Prices' Coffin?

2010-03-12T21:28:11+00:00

Mortgage approvals fell by almost half in January according to the latest release of data from the Council of Mortgage Lenders. This will undoubtedly add fuel to the second-crash-fire. In fact, this alone, particularly the number that mortgages have fallen to, could be seen as capable of bringing a second fall in prices on its own.

According to CML 32,000 homeowner loans were approved in January, some 49% down on December's 62,800. At the beginning of last year, the Center for Economics and Business Research said that if mortgage approvals had not reached 50,000 per month by the start of this year, then there would be a 40% peak-trough fall in house prices, which would happen in 2009 with prices stagnating this year and next. With prices having fallen 20% before bouncing back by 8%, this drop in mortgages could herald a sharp drop in prices.

Of course, this is just one month. The possibility that it is just a blip cannot be ruled out, especially given the freak weather the UK witnessed in January.

Unfortunately there is another more worrying explanation for the fall in mortgages: the government lowering the stamp duty threshold to its original £125,000 from the £175,000 it was raised to as a measure aimed at staving off the downturn. This happened at the beginning of January. That this is behind the fall in mortgages was backed up by the fact that mortgages to first-time-buyers were hardest hit, with a 54% drop. This is a more worrying reason than the freak weather, obviously because the weather is now gone, while stamp duty is here to stay.

The fall in mortgages certainly explains why the indices of Britain's two largest lenders, Halifax and Nationwide both recorded falls in UK house prices in February, of 1.5% and 1% respectively on the month.

The fall in mortgages could also explain the drop in buyers recorded by the Royal Institute of Chartered Surveyors, which said supply rose faster than demand for the second consecutive month in February. This is particularly worrying given that the price rises recorded since last March were being supported by a marginal rise in demand meeting a catastrophic shortage of quality supply in several key markets.

Like I say, the mortgage and demand drop off could all be a blip caused by the freak weather. Time will tell.

UK House Prices: Second Correction Looking More Likely

2010-03-10T11:01:31+00:00

Well, just when I was about to give up on the idea that a second crash was going to come about in the UK housing market, the first sign that it may be starting have emerged. Some of you may be thinking that I am talking about the indices of the Halifax and Nationwide, both of which recorded significant price falls for February, or the fact that mortgage approvals fell in January, but you'd be wrong.

The most significant finding came from the Royal Institute of Chartered Surveyors, which said that the number of people selling their homes rose more quickly than the number of buyers for the second consecutive month.

No one has even tried to deny the fact that it was weak supply that tipped the supply/demand ratio in favour of demand, and pushed up prices. While demand had risen only slightly from historic lows when price rises began, and continued to rise at only very marginal levels as long as they continued. Supply remaining subdued during this time kept pushing up prices.

Now it looks as though the supply/demand ratio may tip in favour of supply, which has long been predicted as capable of heralding a second correction in UK house prices.

I don't know very many impartial observers that weren't surprised when house prices started to rise last March. We quickly realised that it was not a bottom, by the traditional meaning anyway, but that the national average price was being pushed up by people paying significantly more for quality properties in areas where supply fell shortest -- mainly in the south and south west of England.

There is equally little doubt that if supply continues to grow faster than demand then this will put increasing downward pressure on prices. Because homes in the UK are still not affordable for the majority of people, and because of the constraints in the mortgage market this downward pressure could easily herald a second and even equally severe correction.

UK House Prices Up or Down Depends on the Index

2010-03-03T21:37:09+00:00

UK house prices were 2.1% higher in January than in December, and 5.2% higher than in January 2008, according to the latest release from the Land Registry index. This, said the organisation is the second consecutive month that house prices have notched up a year-on-year increase, and the 8th consecutive month on month increase.

According to the Land Registry this is a clear indication that house prices on the whole are rising, despite the recovery being slower in some parts than in others.

The data on UK house prices has gotten incredibly strange lately: the Nationwide index was the first one to record a price increase way back in March last year, with an increase of 0.9%. The Halifax index followed a couple of months later, and with a couple of monthly blips the two indices notched up a rising growth in the coming months.

The indices of the Land Registry and the Government (via the Department for Communities and Local Government) were the last to start recording monthly increases and have only recorded small monthly increases with a couple of exceptions. Now, when the Nationwide and Halifax are recording price rises as slowing, with Nationwide recently releasing the data showing a fall of 1% between January and February, the Land Registry is coming in with one of its biggest ever growths. It will be interesting to see what DCLG say prices did in January.

It is difficult to determine what to take from this: one the one hand we know that the indices of the DCLG and Land Registry are most accurate, because they are based on actual sales, not mortgage applications like those ran by two of the UK's largest lenders. On the other hand mortgage applications have been falling this year, which would back up the slowing of price growth found by the lenders.

So, who knows? We will just have to keep watching and nervously waiting to see exactly what effect the election has, and then what effect whichever government's cutbacks have on house prices.

UK House Builders Risk Reputation to Sue Defaulters, What???

2010-03-03T08:46:21+00:00

I just read a really great article in Overseas Property Professional magazine (anyone who likes reading about property should definitely register), about the British builders that are suing en-masse buyers who have tried to renege on their contracts because the properties have lost value, and/or because they can no longer get a high enough mortgage to cover the purchase.

The affair exposes exactly how much the world has been turned on its head by the use of social media: the article focused on how the builders in question -- including Berkeley Homes, Telford Homes and Ballymore -- are risking their reputation, and that of off plan property sales, by deciding to pursue defaulters. But surely a contract is a contract, and we are all well within our rights to sue anyone who breaks contract on us, right? Apparently not.

The article quoted Fiona Brandhorst, property director for PR firm The Wriglesworth Consultancy as saying: "The public is very much more informed than it used to be thanks to the internet and disaffected groups can organise very quickly, so any company should be aware of that before taking action."

"It would depend on the details of each case but we would tell any client taking legal action to protect their immediate reputation by making sure the party line is kept to across all comments to the press and through social media."

Apparently Berkeley Homes has already had a social presence set up against the move: the Berkeley Homes Collective, and the press have covered the stories on numerous occasions. Meanwhile Berkeley has not set up a PR campaign in defence.

I agree with Berkeley Homes, that the public will realise that the company is in fact in the right; a contract is a contract. If we start picking and choosing what contracts we stick to then everyone will, and before we know it our employment contracts won't be worth the paper they are written on and that is not a world I want to live in.

"Some of the articles that appear online have comments that show a consensus that the buyers' took the risk when they signed the contract and I do think most people in the street will realise this is the situation," Paul Vallone, managing director of Berkeley Homes, told OPP.

"It does create negative PR alongside the Berkeley name but most people recognise that we didn't build our reputation by being sly or untrustworthy. If one group wants to publicise their plight that's their prerogative but, in the long-term, the market is such that it will recover."

At the same time: Berkeley has said that the move comes only after attempts at renegotiation have failed. I don't know the ins and outs, but if that is true then I hope that they are only going after the people who want to renege because of devaluation, and not those who can no longer get a sufficient mortgage to cover the cost.

UK House Prices: What Will Spring Bring?

2010-02-26T21:20:37+00:00

This spring should be an interesting time for the UK housing market. Transaction volumes have been increasing slightly month-on-month since last spring, and, more importantly so have prices. The questions that will make it interesting are:

Will the traditional increase in demand happen this year, with prices rising, a still-restrictive mortgage market and government cut-backs looming?

And, if so, will it be enough to countermand the possible increase in supply?

As we all (or certainly most of us) are aware the rise in transactions has been fuelled by low interest rates, and the gradually increasing availability of mortgages, and, less so by government incentives like the increase of the stamp-duty threshold.

Equally common-knowledge is the fact that the rise in prices has been fuelled only partly by the increases in transaction volumes, and mainly by the massive shortfall of quality property in several areas, which has caused price spikes in those areas, pushing up (skewing) the nationwide averages).

Thus, the biggest vulnerability the market currently faces as we go into spring is an increase in supply in those areas, which are mainly in the south and south west.

There is nothing to suggest a massive or even disproportionate rise in supply in those areas. Sales however, traditionally do increase as we go into the spring, and if this happens then prices should continue to rise.

That being said: we are still in a recession, and we are still heading up to an election in which whoever wins is going to have to make cutbacks. We are also in a stimulatory environment with low interest rates that have to rise sooner or later. Mortgages are still very hard to get, and affordable ones even harder. With all those things to contend with will sales really increase as much as they normally do this spring?

At the same time and for the same reasons supply might tip on its head and increase this spring: in the areas where prices are rising, the growth is a powerful motive to sell, not to mention the people who have and are escaping the negative equity trap. The government cut-backs could bring an increase in forced sales. and the continued unemployment problems are likely to cause continued repossession problems. All of these things mean a rise in supply cannot be banked on.

fact the only thing that can be banked on is that nothing can be banked on. That is why spring is going to be an exciting time for observers, and a nervous time for those with a vested interest in rising house prices and increasing positive sentiment. What will spring bring?

Update 27/02/2010-09:48 - Nationwide released their index for February yesterday, which showed prices having fallen 1% on a monthly basis. This was the first fall in that index in 10 months.

UK House Prices Up Again in December Says Govt, But for How Long

2010-02-18T22:08:16+00:00

Well hooray. UK house prices were 2.9% higher in December last year, than December the year before, according to the recent index released by the government Department of Communities and Local Government -- in other words according to official statistics.

This is fanning flames of positive sentiment that the UK housing market is in recovery, when there are still plenty of reasons to believe that prices are still likely to see a second catastrophic collapse.

The people who believe that this is going to happen will have seen one finding of the DCLG in bold, italic and underlined: the average price paid by first time buyers was 6.8% higher than last year, whilst prices paid by owner/occupiers increased by only 1.4% over the period.

Of course the biggest thing that makes those who believe another crash is looming is the lack of affordability for first time buyers, which was only partially corrected during the downturn, and has worsened again since prices started to rise. So, the fact that the prices paid by first time buyers is apparently rising faster is obviously a worrying indicator.

However, the DCLG index also found that the quarterly price rise had slowed, from a rise of 3.1% in the quarter ending September, to a rise of 2.9% in the three months ending December. As the quarterly index is the only measure seasonally adjusted by DCLG it is reasonable to suggest that it is their most accurate measure.

The other thing that makes people believe that a second coming is due in the UK housing market crash, is the weak economy. Yes, the economy finally emerged from recession in the fourth quarter of 2009, with a growth of 0.1%, which many people belief is most likely to be revised upwards. However, it won't be revised upwards by much, and the fall for 2009 as a whole at over 4% is the largest annual decline in British GDP since World War II.

Then you have unemployment, the last few reports from the Office for National Statistics have not been the barrage of negative data that they were, but even though they are showing that unemployment has just about stopped rising, they are also showing the employment is rising by anywhere as much as it needs to.

Then you have a lack of mortgage lending, and the fact that people with small deposits are being quoted hundreds more per month for a mortgage than those with a big deposit. All these factors are reducing the numbers of viable buyers, which is okay at the moment with supply still low, but if supply should rise then the current stability will be in jeopardy.

Not to mention the fact that we have an election coming up, and a government badly in need of cut-backs, all of which adds up to an uncertain future for the housing market and the economy as a whole.

UK House Prices: Support Growing for Second Crash Scenario

2010-02-12T21:29:01+00:00

Well, you would have to be buried under a stone not to have seen at least one story this week predicting that the second correction in UK house prices is either about to begin, or has already begun. I have read two excellent pieces, one in this is Money, and the other in Moneyweek.

The biggest reality to support the impending doom according to the consensus, is -- something we have written about on this site many times in a similar context -- the lack of affordability in the UK housing market.

This has of course been made worse by the rises in prices since last April. According to the piece in thisismoney.co.uk, house prices rose an average of £1000 last month, just £500 less than someone on the national average salary of £25000 per year would take home.

Then you have the fact that mortgage availability is scarce, with talk of mortgage rationing for the first time since the 80's. Because of the lending situation a hefty deposit is required to secure a decent mortgage.

Unfortunately house prices have been rising faster than most first time buyers can save up that deposit. Not to mention the fact that buyers with low deposits are expected to pay £300 per month more than those with a substantial deposit.

The final nail in the coffin comes from house price analysis website Hometrack, which says that house prices, which rose just 0.1% in January, rose in only 7% of postcodes. More worryingly they said that sales volume (-4.2%) and buyer registrations (-2.7%) both fell faster than the number of property listings (supply -1.3%).

As time goes by there seems to be less and less support for the camp that says the recent rebound was the start of the housing market recovery, and more and more support for the fact that it was a bounce.

UK House Prices may be Flat in 2010 but the Market will certainly be Rocky

2010-02-05T23:47:29+00:00

UK house prices rose at their slowest rate for 6 months in January. According to the Halifax index, prices were up just 0.6% on the month in January, slower than the 0.8% in December, and from 1.2% in September.

This still leaves prices some 9.9% higher than they were at their April trough, and 3.6% higher than in January last year.

In the release, Halifax's chief economist Martin Ellis also gave the lender's forecast of a flat year for house prices in 2010.

"There are some signs that more people are putting their homes on the market. A further increase in the supply of property is possible over the coming months, which would help to curb upward pressure on prices. Overall, our current view is that house prices will be flat during 2010," he said.

This is a very sit-on-the-fence-ish forecast. It is easy to say the market will be flat in 2010, it is a nice safe prediction, given that this is what tends to happen after a severe correction/recession. However, the UK economy and housing market looks set to be a very rocky place in 2010:

Firstly you have the government tax changes due to take their toll on public sector employment, which may or may not be partially or mostly swallowed up by increasing employment in the private sector.

Then you have the increasing sentiment likely to make more people feel that now is the time to sell, an increase in supply would almost certainly apply downward pressure on prices

Also, the pound is likely to strengthen as the UK economy proceeds out of recession, this will undoubtedly lead to the exodus of foreign buyers

Finance still requires a hefty deposit, there is only a certain number of people who have or can raise such a deposit and these could start to run out in 2010

Wages won't be rising much this year either; so unless prices either fall affordability will remain a plague on the market

For these reasons I believe that prices are still looking at taking a second hit this year, but I could be wrong. My basic point is that there are far too many variables to predict with any certainty what will happen, we may as well draw predictions out of a hat than listen to forecasts from economists or pundits -- myself included.

UK House Prices: Everything's Coming Up Roses

2010-01-31T23:36:45+00:00

Well, the news on UK house prices is still positive, that is to say positive for sellers if not for buyers. Last week Nationwide told us that UK house prices rose 1.2% in January, the biggest rise since August, and now, the Centre for Economics and Business Research -- one of the few bodies to have predicted that prices would rise in 2009 -- has forecast a 10% increase this year.

On top of that, mortgage approvals for house purchases keep rising and this is great despite the fact that remortgaging is at its lowest level for years.

The economy is out of recession, hooray, and even the labour market decline has started to peeter our and show signs of turning round.

It is all upbeat except for Hometrack: the housing market analytical body says that prices only rose 0.1% in January and warned that the fact the housing market is being driven by buyers with little if any mortgage requirements combined with the low volume of transactions could be distorting the picture of the wider market.

There are a limited number of people who can buy properties in the current climate; only people who meet the following criteria need apply:

Those who are financially secure and/or in secure employment

And/Or

Who either have the cash to buy outright, or a deposit of at least 10% of property value so that they can get a mortgage, or a family member willing to give or lend said cash

And/Or

Those who can find a bank willing to lend to them even with a deposit at a rate they can afford

And/Or

Those who can find a buyer for their property and sell with enough left over to purchase a new home either outright or with a mortgage

And

Those who can find a suitable home in their area of choice at the right price for them and a fair price for the market

This is a very tough set of criteria, one that a limited number of people meet. Prices are rising now because coincidentally the number of houses available is even more limited. If supply increases before these criteria loosen then prices will fall again, and hard.

For my full predictions read this article.

New Legislation to Affect Landlords in the UK, but How Much...

2010-01-30T21:11:26+00:00

I have just read both sides of the debate over the government's new legislation pertaining to the private rental sector and landlord licensing.

The Landlord and BTL blog says this is a government war on landlords as Labour shows its true colours of landlord hatred in the hope of winning the votes of the masses at the expense of the few, the author writes:

"They [Labour] don't like landlords and want to beat us into submission with legislation. Why? Because it's good for us! Because it's good for communities, society, tenants. No! What it's really about is the fact that they can say to the electorate that they are doing something and hope to snatch the odd vote from poorly informed tenants and Labour supporters who love to see landlords get a good kicking!"

On the other hand Inside Housing says it is simply an attempt by the government to lessen the impact of sub-standard housing within the community, quoting housing minister John Healey as saying:

"Everyone deserves a decent and safe place to live and these measures aim to improve standards of the private rented sector at a time when more people look to rent as their first option in the housing market."

Before I wade in I'll briefly explain what the legislation is:

Firstly: the Department for Communities and Local Government is to give local councils the power to set up landlord licensing programs without central government permission, in areas where there are lots of substandard properties.

Secondly: the law regarding Houses with Multiple Occupants (HMOs) is to be changed; from April any landlord wanting to turn a house into an HMO will have to seek planning permission in order to do so.

Now, I suppose I should really be careful here with so landlords on my follower's list, but we all know I'm not gonna do that. I am forced to say that the Landlord and BTL blog author is overreacting a bit on this occasion.

Firstly, the licensing schemes:

In the locality in which I live, one cannot be a window cleaner without having a licence, for which you pay almost £200 and have to be vetted by the police.

Landlords can have a massive impact on people's lives, it is only right that there should be some kind of controls in place. It is easy for landlords to baulk at such legislation, but we all know that there are some really nasty and irresponsible people in this world, and when that sort of person becomes a landlord he/she can do some real damage to people's mental state, mental health and even physical health.

This is especially worth bearing in mind now, with so many people being forced into rented accommodation because they couldn't afford to keep their house, or worse: lost it to repossession. This I suspect is the reasoning behind the legislation.

Looking at it from that angle responsible landlords with nothing to worry about or hide, will I'm sure either support the legislation or at the very least understand why it is necessary (let's hope it is that group mostly following me or I may just regret writing this post).

Onto the HMO planning permission:

This I also support for pretty much the same reason; an irresponsible landlord with little compassion or even consideration for those unfortunate enough to be his tenants, deciding to go HMO because it will increase his returns is an absolute recipe for disaster, and one which again endangers people's safety. At least if planning permission is sought, at least the properties will be safe and properly thought out.

On the other hand, maybe the planning permission is just another example of the big brother state going too far. That said: one cannot build an extension or garage without planning permission, why is that, for people's safety? So if this is the case then doing something that will involve more people's safety should have the get the plan association nod, shouldn't it?.

Update from Nick @pimlico_flats: "A lot of the angst [among landlords] comes from a tighter definition of licensable HMO, changing from 5 persons in a 3 storey house, to 3 persons."

Thanks Nick, I did not know that, and I can see why that would cause anger.

A Long Hard Look at the Medium-Soft UK Housing Market

2010-01-22T00:22:31+00:00

The latest round of figures is in, again telling a conflicting story on UK house prices past, present and future.

The latest RICS index has shown more homes coming up for sale than there has been for some time, and demand rising slower than it has for months. Because the recent rise in house prices has been fuelled by short supply and rising demand, this could lead to stagnating prices RICS said.

Meanwhile, Rightmove, the UK's largest property portal has reported asking prices rising in January compared to December. This the second monthly rise, and left asking prices over 6% higher than in January last year. However, it is worth noting that the Rightmove index is based on new additions to the site only, which make it skewed towards positive growth.

The Council of Mortgage Lenders said that mortgage lending was 14% higher in December than in January, which was in conflict with the month traditionally representing a lull. While this would normally be welcomed with open arms by the CML, the possibility that December's growth was a rush to beat the end of the stamp-duty holiday on December 31st has left CML cautioning that this could lead to a bigger-than-usual dive in the first part of this year. None the less CML said that: with the economy improving and the credit market loosening, 2010 would be a better year for the mortgage market, especially towards the end of the year.

And finally Britain's biggest private house builder The Miller Group has reported that sales have been rising. The firm has already secured £108m worth of sales for this year, a 104pc jump on this time last year. Keith Miller, chief executive, said that legal completions for last year were flat at 2,068 sales, despite a slow start to the year, although the average selling price slid from £164,000 to £160,000. However, he added that restricted mortgage availability and rising unemployment are potentially a "serious obstacle" to a return to a "more normal" housing market with higher sales and building volumes.

This volatility and conflicting stories is only to be expected from a rise in prices fuelled entirely by a lack of quality homes for sale. The market never bottomed, but price rises were forced upon it by an unpredictable set of circumstances, namely rock bottom interest rates, other stimulatory measures and a supply shortage, which was at least partly because of said low interest rates (prevented repossessions and forced sales from jumping as they would have otherwise).

So, where do we go from here: well, because the market never saw a legible bottom, where bu8yer and seller expectations really met in the middle, the market has been left vulnerable to a rise in supply or a fall in demand, not met by an equal or greater move in the opposite direction of the other. Therefore, until prices and what buyers can afford or are willing to pay are able to meet the volatility will continue. Thus, it will continue until wages rise sufficiently, or prices fall sufficiently. Some believe (including our own Liam Bailey) that this will take until at least the second half of 2011.

UK House Prices Still Rising Says Govt. But How Long Can it Continue?

2010-01-13T10:31:48+00:00

According to government figures released by the Department for Communities and Local Government yesterday UK house prices continued to rise in November. This was to be expected given the results of the other indices of Halifax and Nationwide which are much further forward in time.

According to DCLG house prices were 0.6% higher in November this year than last year, and 1.7% higher than in October. The widely hailed more accurate tri-monthly measure saw growth accelerate from 2.6% in the three months ending August to 3.5% in the three months ending November.

Meanwhile, the debate over the sustainability of the house price rally continues. This week the Guardian's Bearish editor Patrick Collinson has rained on RICS parade by quoting Meryl Lynch economists' forecasts in response to RICS upbeat predictions.

Lynch economists said that the Bank of England stimulus has been among the most aggressive in the world and that we will feel it when they inevitably have to take their foot off the quantitative easing pedal. By feel it I mean see a downward spiral in prices across all asset classes, including property. They don't foresee a double dip, but they do foresee the UK's growth for this year being among the slowest of the developed world at just 1.5%.

The economic climate continues to improve in the UK: the British Retail consortium has stated that UK retail sales in December were higher than they have been for four years. Figures released by the Office of National Statistics today show a 0.3% month on month rise in the index of production, and a quarter on quarter increase of 0.3% in the index of manufacturing.

Even the labour market statistics have been peppered with some slightly positive data in the last two months; overall unemployment rate up, but more people in employment (don't ask me how it works). In the quarter ending October the number of people unemployed increased by 21,000, while the number of people in employment increased by 53,000. There was a 6.1% decrease in the number of people claiming Jobseekers between September and October, which is the first time that indicator has turned positive.

So, it does seem pretty clear that the UK economy is still heading for recovery. It seems likely that the stimulus will continue for as long as the government can, or until there is more significant improvements in the labour market, whichever comes first.

However, on house prices I am still in for a 6% contraction this year, before a prolonged stagnation -- I do see rental rates rising though. Click here to read my full forecast on UK house prices in 2010.

Halifax Say Prices up 1% in 2009 + Jan Prize for Stating the Obvious

2010-01-08T08:45:49+00:00

From 2010 forward Write About Property will be publishing a monthly award for stating the obvious in the industry or national press. The plan was to wait and give the award at the end of every month, but no one is going to beat this one:

in the Guardian article that told us house prices ended the year 1.1% higher than they started it according to the Halifax index. This is much lower than the rise reported by Nationwide, but it is based on a 3 month-3month period, when you look at Halifax's December to December figure they have a rise of 5.6%.

Howard Archer, chief UK economist at IHS Global Insight, said on his forecast of a 5% fall in UK house prices for 2010:

"Much will clearly depend on whether the economy can develop [its] recovery after the highly probable return to growth in the fourth quarter of 2009, how much further unemployment rises, how much earnings rise, how quickly and to what extent credit conditions ease, and how many properties come on to the market over the coming months."

Well duh... Though there are other indeterminate factors that could influence the market in 2010, like the impending general election, the uncertainty over the taxation changes, and how banks circumvent the windfall tax, but apart from those Archer has pretty much laid out every factor that will influence the growth, positive or negative, in UK house prices.

It's like saying how much the grass will grow will depend on whether the seeds were planted correctly, how much rainfall there is and how much sunlight there is. Other than that I agree with his forecast. I have previously forecast a similar decline.

Hands Up Who Wants UK House Prices to Grow 40% in the Coming Decade

2010-01-06T20:04:08+00:00

The UK housing market is getting an unbelievable amount of coverage, well the amount of coverage isn't unbelievable but the amount of it that is portraying it in a positive light and with a positive future is as unbelievable as it is sickening.

Today the Express reports on a Savills prediction that UK house prices will rise 40% over the next decade. That is absolutely brilliant news for estate agents, for homeowners and for high income earners, but for those at the other end of the scale it is nothing short of terrible. Wages are likely to rise by no more than 10% over the next decade so any price rise more than that simply pushes what was once considered a right of the working man even further out of today's working men and women's reach.

Homes are already unaffordable for many of us. As we pointed out in a recent article the average age of a first time buyer has risen from 29 to 30, and for those buying without help from family and friends from 33 to 36. While that is currently mostly because of the restricted mortgage market, or rather the huge deposits it negates, who really wants a return to the 100% mortgages that caused the crisis? As we point

Unfortunately, as the Express pointed out, that is a modest prediction for what prices could and are even likely to do over the next 10 years.

"The prediction is fairly conservative, equating to just 3.4 per cent per annum. This is at the lower end of our expected range," said Stuart Law who heads up the Assetz outfit.
"We would expect prices to increase by up to six per cent per annum over the next decade. Continued and extreme housing shortages versus high demand give us confidence that growth will continue over the coming 10 years," he explained.

Nicholas Leeming, commercial director of property website Zoopla.co.uk, agreed that a 40 per cent rise would be "modest".
"Britain is a crowded island with limited land, a growing population and highly restrictive planning laws. Successive governments have failed to meet house-building targets, and there is little sign of any change, whatever the political weather. But homes are likely to become more expensive relative to earnings as supply fails miserably to keep up with demand," he said.

Unfortunately I am in a position to disagree with them. The last crash happened in 1989 and while the major falls (20%) stopped in 1991/2, the market stagnated until 1996 and the decade ended with a contraction of about 15% overall.

Sure, that crash didn't have any rises in between, but the last crash wasn't based on the near complete breakdown of not only the UK banking system but that of the US and most of the world. No one impartial can believe we have seen a real bottom in this crash, their reactions are filled with shock and disbelief at the rise we have seen based on demand fuelled by the government stimulus and low interest rates coupled with the low supply as foreclosures slowed and people chose renting over sales.

We could still have more falls and at best we are looking at stagnation for at least 2 years. That leaves 8 years, and if there is growth of 5% before 2014 I will be very surprised, which will leave the market playing catch-up.

UK Housing Market, Do You Want the Good News or the Bad News

2010-01-04T23:02:22+00:00

In what is now typical for the UK housing market; anyone reading the Guardian online today will be able to read a story that puts the housing market in a positive place, and a story that puts it in a very bad place.

Firstly the Bank of England tells us that mortgage lending increased again in November. The 60,518 mortgages approved is the highest monthly figure since March 2008, and well over twice the 27,330 recorded in November last year.

At the high point of the crisis, one of the financial research bodies (the Center for Economic and Business Research I think) cautioned that if mortgage approvals weren't more than 50,000 per month by 2010, then prices would continue falling until 2011.

Against that: the Halifax have reported that the number of first time buyers has dropped to its lowest point in 10 years, despite the fact that homes have gotten more affordable according to its measures.

The Halifax report and quoted economists have gone to great lengths to explain just how much more affordable houses are: homes are now affordable in 40% of the country, compared to 6% in 2007, and now homes in 90% of local authorities are affordable, compared to 31% last year.

Meanwhile the average age of a first time buyer has risen from 29 to 30, and for those buying without help from family and friends from 33 to 36.

It is little wonder that, according to the Financial Times Britain's leading economists are almost unanimous in their view that house prices are still too high.

"Of the 70 who answered the question, 13 believed residential property prices were now fairly valued, while 55 said they were not and two did not express a view," said the FT report.

Ross Walker, at the Royal Bank of Scotland, said: "The poor disposable income outlook, coupled to the absence of a financial sector able or willing to extend large quantities of new mortgage finance, will at the least constrain further house price gains and probably force modest declines."

Regular readers will already know that I agree with the consensus, you can read my full forecast here. Anyone sick of reading my articles will be pleased to know everyone else is returning after their Christmas break tomorrow.

UK House Prices Rose 5.9% in 2009 but 2010 is Clouded in Fog...

2009-12-31T20:41:49+00:00

Well, Nationwide have released their figures for UK house prices in December and there is nothing very surprising at all. The rate of monthly growth slowed massively with a growth of just 0.1% between November and December. This brought the annual growth to 5.9% for 2009.

The accompanying report says that 2010 is clouded in fog. Raising the same points I have over just how many people there are left that have the deposit to get a decent mortgage. Whoever wrote the report should have been a politician; the last labour market report I read was slightly more positive than the last, just as it was slightly more positive than the one before that, but it still showed the unemployment rate rising. Nationwide however, have chosen to highlight the decline in claims for Jobseekers allowance.

Correctly, the report concedes that there will be significant public sector job losses in 2010, and there may not have been sufficient recovery in order that they can all be reemployed in the private sector, which is bound to apply renewed downward pressure to house prices.

But for some sort of miracle -- like the finance-fairy leaving 200 billion under Mervyn King's (Bank of England governor) pillow for 100% mortgages -- I am sticking to the forecast I made in a recent article: the price rise seen this year, 5.9% according to Nationwide, and about 8.5% according to Halifax, will be knocked back of next year, and then prices will flatten until at least the 4th quarter of 2011.

UK House Prices in 2010: My Forecast

2009-12-29T22:36:25+00:00

Well, house price analysts Hometrack have added their tuppence into the debate over what 2010 holds for UK house prices. They have said that they will fall 1% next year, which is more than they have fallen this year according to the firm.

Here is my tuppence:

During the last crash in the 1980's, UK house prices fell for 3 and a half years straight, between Q3 1989 and Q1 1993, during which time UK homes lost 20% of their value. Prices were then flat until the second quarter of 1996.

Now, this time, house prices fell by 20% a lot quicker, and I would say that house prices would stay flat in 2010, had prices not risen significantly since the start of this year. For me, that rise will be cancelled out again and then prices will stagnate.

Depending on who you listen to prices have risen by 6% (Nationwide) - 8.5% (Halifax) since the trough in April, and I believe they will fall by between 6%and 8% next year, before then stagnating until at least the third quarter of 2011. Read this article for why I think the market will turn properly in Q3 of 2011.

While a lot of analysts and analytical bodies (Hometrack -1%, Savills -7%, Jones Lang la Salle -7%) share my views that house prices will fall next year, many others are predicting price rises next year, most notable the Centre for Economics and Business Research (CEBR), as well as Chestertons and Hamptons.

Of course no one knows for sure what is going to happen to UK house prices in 2010, we are all just making educated guesses. It sure will be interesting to see who is right though.

Data on 1980's crash from Nationwide historical data

Housing in the UK Less Affordable Since Price Rises Began... Well Duh!

2009-12-27T20:48:43+00:00

Well, there's a shock: housing affordability in the UK has decreased in the second half of 2009 -- probably something to do with the fact that house prices have been rising and wages haven't.

None the less that is the news the Telegraph has broken today. The Nationwide affordability index told us nearly three months ago that UK housing had gotten less affordable since prices started rising. The news lies in the fact that the research behind today's report is from the revered Lombard Street Research. The article says:

"Whereas the others [other affordability indices] simply compare mortgage costs or gross incomes with prices, LSR's index compares prices with definitive household disposable income and the monthly mortgage burden. The comparison is key to working out whether homes are of an accessible price or not, since fast-rising incomes can make property more affordable."

The LSR index may take more detailed measurements to gauge true disposable income, but it is still working off the same price data, which makes it flawed as an indication of affordability.

The national average house price has risen in the second half of this year, in fact it is expected (as the article says) that Nationwide and Halifax will both report that the rise has now been sufficient for the price to end the year on a rise compared to what it started at. But that growth is based on strong growth in a few regions (London and the South-East). Almost everywhere else prices have either stagnated or continued to fall.

Not that I am saying house in the rest of the UK are affordable. I am simply pointing out that the LSR index is a flawed measure of just how bad the problem is -- not that any of the others are any better.

As I have previously written: homes in the UK have gotten unaffordable to first time buyers, making a correction inevitable -- the credit crunch was simply a catalyst for what needed to happen. During a correction like this (as we have seen before) prices fall until homes are affordable, no matter how long it takes. So the recent rises are simply prolonging the agony. For a full explanation of this read this article, which links to several others I have written on the subject.

House Purchase Mortgages Now Up on 2 Years Ago - Still I'm Saving My Champagne

2009-12-25T19:41:08+00:00

Sorry to all my regular for it taking me this long to put pen to paper on the British Bankers Associations figures for lending in November, but it is Christmas.

After the Council of Mortgage Lenders said that mortgage lending fell 10% in November, the BBA said that the number of mortgages approved for house purchase in November this year was 44,125, which is 152.3% higher than last year, and 0.4% higher than 2 years ago -- the value of the loans was 200% higher than last year.

Even I cannot argue with the significance of this finding: it does indicate that demand for housing is growing to levels that could support the beginnings of a sustained recovery, and also that credit conditions are easing finally.

Yes, the housing market had already turned downwards in November 2007, with mortgage approvals in the 70,000's in the peak months. However, a rise year on year after 2 years of decline is simply logic, a figure higher than 2 years ago after a 28 month decline is, or certainly could be the first uptick of the recovery.

Did I just say that? Yes I did. I have been covering the rises in mortgage lending for house purchases for several months now, always managing to find an excuse to play it down. Last time it was the fact that the rise was only year on year as mentioned above -- now I am out of excuses.

However, I won't be breaking out the champagne yet; and not just because a full recovery in house prices won't make me raise a glass if it means we go back to how it was before -- boom and bust. No, my champagne will still be staying cool until 2011.

Unemployment is still dragging us all down. The rising number of people taking mortgages now are the dwindling numbers of people who are secure in their job, and who have or can raise a 10%-20%.

Without an improvement in the job market the number of people who can meet those two criteria will eventually start to get smaller and smaller and smaller. There is little chance of an improvement in the job market until 2011, and I believe downward pressure will increase sufficiently to start pushing prices down long before that.

You can't disregard the numbers of people rushing to buy now while interest rates are low and costs are lower (Stamp Duty holiday on props under £175k ends December 31st, at which point 1% will once again be levied on all properties over £125,000). This could be another factor in driving down demand and ultimately prices in the coming year.

Not to mention the wait and see attitude to come from the impending election and the tax changes announced by Mr Darling. All in all we will be lucky to escape further severe price drops in 2010, let alone rises.

Predicting The Housing Market in 2010 is Less Easy than People Seem to Think

2009-12-24T23:21:21+00:00

It must be because its Christmas, but in the last 15 minutes I have read three forecasts for what the housing and buy to let markets will look like in 2010 and everyone of them offered an oversimplified view.

One report in this is London, said that house prices in Central London would soar to their pre-crunch levels next year, and would have grown a staggering 80% by 2012 because of the "halo effect" from the Olympics. All while the rest of the UK "stagnates".

Since the article contained no real substance on where all this growth was going to come from next year, I will go the same route: without bonused-up bankers on a spending spree you've a fat chance of prices soaring. They may continue their awkward juts upward, but these will either be followed by a reversal of that growth or stagnation as the underlying economy will not be supporting house price growth until 2011.

We should all be upset if prices in Central London don't rise, because this growth spreads into other sectors and other areas. Well, I'm sorry, but as far as I'm concerned central London house prices are driven by a mixture of greed, arrogance and egotism, and call me foolish but I hope it doesn't spread to my area.

Disagree, but how else can you explain a house languishing on the market; struggling to sell at £250, 000 one week, and back on the market and sold for £500,000 a week after one of the big banks doled out its bonuses.

The second was on the Property Hawk blog, which is a blog I love usually. However, in a post looking at an Association of Residential Letting Agents forecast for a bleak 2010 the editor writes:

"With over supply of rental properties because of the accidental landlord reducing and rental demand remaining high my feeling is that the outlook for landlords is not so bleak."

Maybe he/she has a Crystal ball but when did we get so sure that forced landlords would reduce or continue reducing in 2010. Yes, house prices are going up in and around London but not elsewhere. At any rate, according to a recent report by the BDRC research group forced landlords make up just 1% of landlords anyway.

RICS: House Prices to Rise in 2010, They Might, Nothing Will Stop the 2nd Bite

2009-12-23T00:00:51+00:00

Today the Royal Institute of Chartered Surveyors forecast that UK house prices would rise by 1-2% next year.

They said that, though supply would rise in the first part of the year, it would not increase sufficiently to meet the rate of rising demand.

Simon Rubinsohn, RICS chief economist said:

"The imbalance between supply and demand will continue into the early part of the new year resulting in some further house price gains. However, the combination of more available property and the beginning of the exit strategy from the big stimulus programmes that have helped support the economy will gradually exert a greater influence.
Transactions levels are likely to increase, fulfilling the Christmas wish list of many agents throughout the country but first time buyers are likely to continue to struggle to procure finance from lenders without the help of generous relatives."

Maybe prices will rise in the first half of next year, but without any of the things that made this correction so severe changing, then all the rises are being built on sand.

Unemployment: though the situation has improved slightly in the last two releases, the unemployment rate is still rising.

Restricted lending: though house purchase mortgage approvals have crossed the 50,000 per month barrier according to the Council of Mortgage Lenders many people can't secure finance because they don't have the deposit, and banks are still being a lot more strict in their measurement of who gets a mortgage and who doesn't -- shutting the gate after the horse has bolted anyone?

Affordability: homes are still far more expensive than first time buyers can afford. According to the Nationwide index at the bottom of the last round of falls, the average mortgage repayment was about 90% of the average first time buyers salary. It is now back up to 92%. During the crash of the late 80s it went down to 60% before prices stabilised.

Vendor realism: the Rightmove index has shown asking prices continuing to rise throughout this correction. A true market bottom is unlikely until the gap between what buyers are willing to pay, and what sellers expect to receive comes closer to cloing.

So, I'll say it again: maybe house prices will rise in the first half of the year, but whether it happens in 2 months, 4 months or 12 months, this correction has a second bite and it is going to be nearly as bad as its first.

Young Index of Buy to Let Investor Sentiment full of Non-Surprises

2009-12-20T20:44:41+00:00

Faith continues to increase in the UK housing market as prices continue to rise, all the while the recurring correction gets closer and closer.

Today the Young index released the findings of its survey of UK landlords. The general message is that they are more confident about the market than they were in the last quarter and this time last year, which is hardly surprising.

It is also not surprising that 99% of investors intend to hold their assets for at least 12 months; at present it is only weak supply that is propping up the market, investors will be happy for this to continue until buyer numbers increase sufficiently to take up the slack. The percentage of investors planning to hold for 10 years increased from the 44% recorded in Q3 to 49% in Q4, and 22% intend to hold for 20 years or more. The average is a 12 year hold, two years more than last year's average.

Some 59% of investors are planning to increase their portfolio with new properties in the capital in the next 12 months, and 43% with properties outside the capital. This compares to 33% and 8% respectively in Q4 last year.

76% of investors believe that London property prices will be the same or higher than they are now in 12 months, up from the shocking low of 36% last year. 60% of respondents foresee property prices outside the capital rising in the next 12 months, the only surprise there is that the figure isn't higher.

Overall, landlords forecast that London property prices will be 0.7% higher than they are now by the end of 2010, and that the rest of the UK will see house prices 1% lower than they are now by the end of 2010.

For me the most significant of the findings of the Young index was that 39% of respondents cite lack of mortgage availability as their main concern going forward, up from 28% this time last year.

Landlords are undoubtedly buoyed by the several consecutive months of UK house price rises. However, the wider market is looking less and less healthy. As I said; it is only weak supply in some areas propping up house prices, now mortgage lending is falling again, repossessions and unemployment continue to rise, and the number of first time buyers -- the life blood of a healthy housing market -- continues to decrease.

Just under a fifth of those registered with estate agents were buying for the first time last month, according to the National Association of Estate Agents, which is a sharp fall from six months ago, when 43 per cent of the market was identified as first-time buyers.

UK Retail sales Continue to Rise in November

2009-12-17T10:21:03+00:00

Retail sales in the UK have risen on a year-on-year basis for the third consecutive month in November, according to figures just released by the Office for National Statistics.

The volume of retail sales in the UK in November 2009 was 3.1% higher than November last year, and the value of those sales increased 2.7%.

Of course it is expected that sales will increase in the run up to Christmas, but the fact that the same logic was in action during the same period last year, still means that people's confidence in the economy is improving, and more importantly translating into an increasing willingness to spend.

Analysts have recently suggested that UK GDP actually grew June-September, but according to official figures the UK was still in recession in the third quarter -- this made it one of the last economies in Europe to leave recession. Of course all of us are hoping that we will pop our head back up from the sea of financial misery to take a breath of the 4th quarter's economic fresh air, but unfortunately nothing can be ruled out at this stage.

The current argument over house prices is stronger than ever; some say that prices will grow, with forecasts ranging from 3% to 10% and others are saying that the current bubble (bubble of positive feeling, not the traditional sense) will burst in 2010, as unemployment continues to pile on the pressure and the momentum runs out as those who can afford the stiff deposits still needed start to become fewer in number.

You would think that the positive data on retail sales would have lifted the value of Sterling a little, and it might have, if the Bank of England hadn't kept interest rates at 0.5% yesterday. Funnily enough it is one of the main bankers who is the biggest proponent of a fall in house prices next year, well Monetary Policy Member and interest-rate-setter Kate Barker to be precise.

In other ONS News Released Today:

UK Residents continue to travel abroad less, spend less and we are also receiving less foreign visitors.

Residential Lettings in the UK: Where are we Now?

2009-12-13T13:09:03+00:00

The average rent for a UK property has increased by 12.6% in the last 12 months, but this growth has turned negative in recent months, according to data released today by rentindex.

According to rentindex the average rental rate of a UK residential property on December 13 2009 is 587.487 per month, based on 4860 tenancies. This is, as I said an increase of 12.6% on last year, and an increase of 0.176% on 6 months ago. Unfortunately it is almost 0.2% down on 3 months ago, and nearly 1% lower than it was last month.

The Royal Institute of Chartered Surveyors has recently forecast the rents will rise in 2010, as rental supply weakens when more forced landlords start to put their properties onto the somewhat revived market.

"It seems the current upward trend in the housing market is having a significant effect on the lettings market with many of the accidental landlords returning to the sales market to take advantage of the recent price increases," said RICS spokesman Jeremy Leaf.

"As a result the recent oversupply is reversing with new instructions at the lowest levels we have ever seen. This of course is impacting on prices and tenants no longer have as strong a bargaining power as they did," he added.

However, a recent study by the BDRC research group found that of the 20% of residential landlords that have been such for less than 24 months, only 1 in 20 have been forced into it by their inability to sell their property.

I am reluctant to argue with RICS stats, -- despite the fact that they have a commercial interest in positivity in the market -- because they are well respected and at least try to go with what the market is really doing. I am less reluctant to argue with the BDRC because they are equally if not more respected, and do not have a commercial interest in either the rental or the sales sectors of the residential property market.

To avoid arguing with either, I will instead suggest a potential alternative reason why rental supply might be decreasing; in a word: Christmas. Very few people want to move house at Christmas time, so it is possible that landlords have decided to save their marketing pound during a recessionary Christmas. Perhaps this is combining with the small number of forced landlords deciding that now is in fact time to sell. This could also potentially explain why rental rates have fallen recently.

But we can't have it both ways: supply is currently supporting house prices, pushing them upwards even. So, yes, this may well make more people feel like selling. As prices continue to rise it may even make more people able to sell by removing the negative equity noose from around their mortgaged neck. But if supply increases, this will then push prices down again, and supply will either cap-off or even fall once again, and rental supply will likely increase again also.

Where I do agree with RICS is in rental demand. The New Year is a time when a lot of people think about moving house, and with the still-restricted mortgage market and 10,000 average deposit, this will mean looking at somewhere to rent for most people. However, this increasing demand will also bring about increasing supply as those people will be moving out of somewhere and that property will become available.

Curbing Banker Bonuses to Wreck the Recovery, Who's Recovery is it Anyway?

2009-12-11T22:51:38+00:00

Well, I've heard it all now. Estate Agencies in London are saying that the tax on banker bonuses will wreck the recovery in the prime sector of London, which will spill over into the rest of the market and wreck the recovery throughout the UK housing market.

"We were relying on City bonuses coming in to support the prime London market next year as more supply is expected to come through," Lucian Cook of Savills said.

In other words: we were going to be quite happy lining our pockets on the big sales, in the same kind of market that led to the crash, which has left much of the country swimming in debt with a house worth less than they paid for it.

They might want the market to once again by propped up by a sector as volatile as banking, fuelled by the even more volatile stock market, but the rest of us probably don't. The thousands of first time buyers unable to afford a property in the capital because they were unlucky enough not to work in the "city", probably don't either.

In fact if one good thing comes out of this downturn, it will be that we have been given the chance to break the financial districts hold on the property market. Another good thing would be financial regulation that caused prices to grow at an unrealistic rate in the rest of the country and the world but we are still waiting on that.

Savills said long before the government's attempt to curb the bonuses that it expected house prices in the UK to fall throughout next year, but according to their current statements they obviously thought: ah, who cares if prices fall up and down the country, we'll still have the bankers paying multi-million sums for a property that is only that amount because it is in a banker's district and bankers once again have money to burn.

I congratulate Darling, a lot of people thought he wouldn't have the bolcheviks to follow through on the tough statements, but as his opposite number with the Lib Dems pointed out: there is nothing to stop the bankers paying out the silly sums of money in increased salaries.

End of Stamp Duty Holiday Not Even on the Richter Scale

2009-12-09T23:58:04+00:00

Well, unless you have just moved out from under a rock you will know that Alistair Darling read his statement today, on the pre-budget report. His words were aired live following Prime Minister's question time, live on BBC2 and several other Beeb channels today.

Though the economy itself affects the property market, and anything that will affect the economy in some way will indirectly affect the property market, the only part of the report that really has the potential to impact the property market is the Stamp Duty holiday not being extended past its December 31st end.

This is being hailed as having the potential to derail the current signs of recovery in the housing market, but in reality it doesn't even register on the same chart as the other problems the market faces in 2010.

Some are arguing that the reduction in banker bonuses, because of the 50% tax levied on the issuing bank will also have an impact. While this is true, it will only affect Central London, which has skewed the overall picture of UK house prices for far too long anyway.

So, back to the stamp duty holiday: since September 2008 stamp duty has only been levied on properties bought for more than £175,000, previously it was paid on any purchase over £125,000. This is widely agreed to have been at least partly responsible for the slight increase in housing demand this year.

From January the first the stamp duty will revert back to its original state, and anyone buying a property priced at £125,000 or more must find an additional 1% of its value.

This is being hailed as having the potential to derail the current signs of recovery inthe housing market, but it just isn't true. The increased demand isn't even responsible for the so called recovery in the first place. In fact, even the Royal Institute of Chartered Surveyors accepts the fact that house prices should still be falling with the current transaction volumes.

Were it not for the fact that the slight increase in demand has been met by a far more severe contraction in supply -- especially of quality homes in the best areas -- which has pushed prices in some areas up to 2007 levels, then prices still would be falling.

What's more prices should still be falling. I am sorry for the people in negative equity, and for all those who fall into it in 2010. But the fact is UK property is mostly over-priced, and certainly unaffordable for the vast majority of people -- especially first time buyers.

The financial crisis stopping the easy availability of credit was only the catalyst; eventually this correction would have come anyway, as first time buyers were continually priced out of the market. Either that or it would have been our sub-prime borrowers defaulting en masse that would have sparked the crunch, rather than those in the states.

On top of that unemployment still has the potential to get worse, and it will certainly be a long time before it gets better. And on top of that the availability of affordable finance is still nothing more than a hope for the future. With the final point in mind, perhaps it is the 50% tax on banker bonuses that will have the biggest impact. Not in the way mentioned above, but if it does as some fear and reduces lending, not bonuses.

So, on the scale of 1 to 10, the end of the stamp duty holiday does not even register on the same chart as the other problems faced by the UK housing market.

UK House Prices to Stagnate or Fall Says Fitch

2009-12-06T21:11:17+00:00

Ratings agency Fitch has said that UK house prices either face a prolonged period of stagnation at best, or a double dip at worst, as high unemployment and constricted lending take their toll in the coming years.

This has been my own view, and recently Savills and other major investment and realty groups have forecast the same, however, Fitch is one of the biggest and most impartial sources to make such a forecast thus far.

House prices will fall a third from their 2007 Fitch said. Depending on who you listen to they had fallen between 10 and 20 percent at the start of this year, and have since risen by 2-5%, again depending who you listen to. Either way Fitch thinks prices have a fair way to fall yet.

I recently compared them current crash to the last one, and did a comparative analysis based on affordability, which led me to the forecast that prices will fall by between 9.7% and 40% further before homes will be affordable enough for the market to bottom.

Of course vendor realism is another factor. In fact it is a commonly held belief that vendor realism is the most important factor; that the market will not bottom until the gap between what vendors expect to receive, and buyers are willing to pay is closed.

In this some recent news on the Floridian property market is very worrying; apparently vendors of Florida properties are still not being realistic about asking prices, and the crash has been going on longer there than here.

Yet, still prices are continuing to rise, month on month, quarter on quarter, and potentially even year-on-year in the next month or two if the rises continue. However, the recent price rises had been supported by rising mortgage approvals for home purchases. This ended in November when the value of such loans fell from 2.7bn in October to 2.1bn in November.

Meanwhile, unemployment is still a massive problem and mortgages are still available to the few, and affordable to the fewer -- and homes still are not affordable.

Whether it happens in 6, 12 or 18 months, for me there is still absolutely no doubt that there will be a second dip in UK house prices.

UK House Prices up 0.6% in Oct say Land Reg, Analysts all Prepare for the Fall

2009-11-27T23:18:22+00:00

So, UK house prices are still rising. Today the Land Registry, by far the most accurate index of prices in England and Wales -- if a bit behind the rest -- revealed a 0.6% increase in house prices on the month in October.

Meanwhile sales volumes are still falling, with 52,608 sales per month recorded between May and August this year, compared to 56,107 per month in the same period last year.

One must wonder how long the lack of supply causing disproportionate rises in some areas, will distort the picture of the UK housing market, which is clearly still in a lot of trouble. How could it be anything else with UK unemployment so high, finance so tight and with so few people in a position to afford the step onto the property ladder.

Even the Royal Institute of Chartered Surveyors is asking the same question, in fact they are acknowledging that it will be hard pressed to survive the continued negative pressures into next year.

"House prices are set to rise further in the coming months supported by an ongoing shortage of property listings relative to demand.

"That said, renewed challenges are set to face the market in 2010 particularly in some regions where unemployment will remain elevated. In particular, the ending of the extended zero band on stamp duty in the new-year could have a disproportional impact on those markets outside London and the south east."

Savills also forecast that prices will fall again next year, before returning to growth in 2011. In the last housing crash house prices fell for nearly three years, and then didn't rise for a further 3. There is nothing as yet to suggest this one will be any different. The current price rises have stopped the correction and are only going to drag it out further.

UK House Prices News Roundup, Second Dip Still Looms

2009-11-21T20:37:15+00:00

I thought it was about time I put pen to paper on UK house prices and the housing market. I grew fed up of covering every minor piece of news, none of which were changing my view point away from the fact that a second dip is inevitable. So, has anything happened since I last wrote on UK housing market to change my view, sadly, the answer is no.

Since I last wrote, Rightmove have put out their asking price index for November, in which they said asking prices were down 1.6% compared to October, when they had risen 2.8% compared to September. November asking prices are still 1.6% higher than last year, according to the index.

As I have always said, falling asking prices are a step in the right direction for the market, because vendor realism, or the lack thereof is one of its biggest hindrances.

However, now that house prices are rising, vendor realism isn't an issue. And I have come to the conclusion that Rightmove's index is hardly worth bothering with, because it only contains data on new properties added to the site in the fortnight before its release. This makes it vulnerable to things like estate agents upping price expectations to win instructions etc.

I covered the Savills forecast on house prices falling until 2011, and how it mirrored my own forecast, but now Nationwide has also come out with a downbeat forecast on 2010 house prices. The lender says that rising unemployment in 2010 will inevitably exert downward pressure on house prices.

In contrast, most RICS members are forecasting price rises in the short term. The simple fact is, there are far more things that look likely to drive prices downward than upward.

Things likely to push UK house prices down:

Finance is still restricted and unaffordable to most.
The stamp duty holiday is about to end.
Average mortgage repayments are still well over 90% of the average first time buyer's salary.
Unemployment is still rising, though the situation is improving slightly according to the latest data.
Millions of repossessed homes are still to come onto the market in 2010, which will push supply up.

Things likely to push prices up

Restricted supply
Increasing demand
Improving sentiment

So you can see why a lot of analysts are forecasting a second dip in UK house prices. If or when it does happen, the only surprise for me and many others will be how it managed to stay away for so long.

Painting a Clear Picture of the UK Residential Lettings Market

2009-11-12T00:04:32+00:00

There is a really good report on the UK residential rentals market from the BDRC research agency. According to the report a quarter of all landlords have seen profits fall in the 3rd quarter, 7% had recorded a small loss and 1% a large loss.

It said that, though half the respondents said they increase rents at regular intervals, in the last 12 months 19% have decreased their rent, 27% have increased it and 49% have kept it the same.

But the finding that will be the biggest surprise to many is that 20% of current landlords have been in the game for less than 24 months, with only 1 in 20 of those forced into renting when they were unable to sell.

This confirms what I have been saying in many articles, including this one, and this one, that the flurry of repossessed auctions earlier this year was primarily attended by novice investors.

As I covered in the first article linked above, recently an Association of Residential Lettings Agents survey found that the average number of properties owned by residential landlords had increased from 6.4 in March this year, to 7.5 in June, before falling back to 7.0 in September.

ARLA said that this indicated that residential landlords have been buying property this year. Critics said it was simply because of the number of novice 1 and 2 property owners who have been repossessed since the onset of the downturn.

The BDRC report contradicts them both. However, the ARLA survey suffers from a reduction in the number of respondents, and also the fact that it is primarily investors with large portfolios who use the services of letting agents. One or two properties can easily be marketed by the landlord, and that is far healthier on the cash-flow.

The BDRC report paints the most accurate picture of the UK residential lettings market, because it both backs-up and is backed-up by other impartial reports on the market, including those on the auctions earlier this year.

Landlords will therefore be happy that the report painted a much brighter picture of the market in 2010.

Mark Long, director at BDRC, said: "With 2009 characterised as a year of survival for many landlords, we are starting to see signs of a brighter future into 2010.

"Despite the current profitability situation, as shown by the findings in the latest wave of the Landlords Panel survey, prospects for rental yields do appear to be improving in line with our landlords' optimism index.

"The UK's private landlords are a resilient bunch and will opt for a strategy that allows them to protect their income and portfolio."

UK House Prices: There is Only One Realistic Forecast

2009-11-06T22:03:02+00:00

Well, the latest news on the UK housing market is that Savills are forecasting house prices will fall sharply next year, before resuming solid growth in 2011, which will accelerate in subsequent years. And research body Hometrack have revealed a 0.2% growth in house prices in October, but also found that demand is beginning to decrease, which could dampen the upward pressure on prices.

For once I actually agree with Savills. Mostly because they are forecasting what I forecast a couple of months ago (glad it is on an external site), that a second dip will come in UK house prices, and that it will only be turned around by the economy reaching the point in a recovery when employment turns into positive growth, which I also said would be 2011 -- mid-2011 to be precise.

As for Hometrack: I trust their data because it is well presented and apparently impartial. So, if Hometrack says demand is beginning to drop off then there may be trouble ahead. The recent rise in houses has always been supported by a marginal increase in demand meeting a massive shortage in supply. Therefore if demand decreases -- even marginally -- it will lead to a second dip in UK house prices.

Anyone who takes a logical and impartial look at the UK housing market will come to a similar conclusion; the conclusion that a second dip is inevitable. There are just too many things that are likely to trigger it:

Unemployment:
Because it will either lead to a rise in supply from repossessions, or a fall in demand because of the obvious, or both.
Restricted mortgage lending:
Because it will lead to a fall in demand when cash buyers dry up, including foreigners who will disappear if the pound strengthens -- though that is only likely to happen when the economy is really recovering and unemployment beginning to fall.
Affordability:
When the downturn began the average mortgage repayment was taking 136.2% of a first time buyers salary. The last correction brought it down from 147.7% to 60% before prices rose for any more than a month or two, and down to 46.2% before the market truly began to recover. The current correction had taken it down to 91.6% before prices started rising and pushing it back up again.

I could go on, but you can come up with the rest yourself. If anyone can present as many reasons to support the current price rise becoming a full recovery please feel free to do so with a comment below.

UK House Prices Still Growing - When Will it All Come Crashing Down?

2009-11-04T10:47:24+00:00

I thought it was about time I put pen to paper with the latest news on UK house prices, well, rather my opinion on the latest news about UK house prices.

Still the growth continues, and the longer it goes on the more optimistic agents are that maybe, just maybe and despite of everything that would in a normal world prevent recovery, that this could be the start of a prolonged recovery. I am still sticking to my guns; there is going to be a second dip, and sooner rather than later.

According to Nationwide (generally the most positive) price growth slowed to 0.4% in October. This was still enough to turn price growth positive on an annual basis for the first time since last march; house prices are now 2% higher than in October last year according to Nationwide.

According to Halifax house prices grew 1.2% in October, leaving prices now just 4.7% lower than in October last year, but 2.9% higher than at the start of this year.

Prices are growing because of the massive shortage of saleable supply, and because demand has picked up slightly. In the best areas, where there is a serious shortage of quality family homes -- mainly in the south/south west -- prices are growing by huge margins as people fight for the best properties armed with only their wallets.

Thus, the current "recovery" is very fragile to two things.

1: Supply increasing at a much faster rate than demand

This could happen if the interest rate goes up, leaving thousands unable to pay their mortgage and facing repossession. This is also likely to happen if prices continue to grow in the good areas, and too many people start to think they too can get a good price. Rising unemployment could also have an impact here, as any major company putting thousands out of work and flooding its area with hundreds of repossessed properties.
2: Demand falling, especially if supply increases for the reasons given above

Of course the reasons given above that could cause supply to increase, are equally capable of causing a drop in demand. The other factor when it comes to demand is the fact that the weak Pound has and is bringing thousands of wealthy people from around the world into the UK in search of property bargains. If the Pound strengthens these will quickly evaporate.

And that is before I even mention affordability. When this correction began, I observed that if it was anything like previous corrections, it had happened because the percentage of first time buyers salaries being spent on mortgage payments had crossed the 100% threshold, and that prices would fall until that figure was closer to 60%. In Q2 it was at 93.6% and prices have risen since then.

Based on that, prices have between 9.7% and 40% left to fall before homes are affordable to the housing market's life blood. Read the article: Calculating the Past to Determine the Future of UK House Prices for a full explanation of this.

Land Registry Records UK House Price Rise in September, Where is the Second Dip?

2009-10-28T20:53:18+00:00

Well, I am in shock. The Land Registry index has recorded a rise of almost 1% in UK house prices in September.

Bang goes the second dip theory. For those of you just tuning in, the Land Registry began showing prices rising in June on a monthly basis. This confirmed the other indices of the Halifax and Nationwide, which began showing monthly rises earlier. The rises were based on marginally rising demand meeting massively contracted supply. This, said I was unsustainable, a second dip must be looming.

So when the Land Registry said prices had fallen in August, by a whopping 0.1% I was quick to shout from the roof top about how this was the start of the second dip. Now it looks like I was wrong.

I do still believe that there will be a second dip, in fact the longer that prices rise now, when it is too early, the more another correction becomes imminent. This is because, homes still aren't affordable, mortgages still aren't available to the majority of people without a huge deposit, and a large portion of the population is either unemployed or facing unemployment.

See this article for a full explanation of why another correction will happen sooner rather than later, because of affordability alone.

According to Richard McKay, director of private property sales portal Zungalow.com says there is also another problem making a correction more necessary.

"Prices should not have started rising, because the market never bottomed. The gap between vendor expectations and buyer estimations never closed, triggering the increase in sales you would expect when this has happened and the market has bottomed. Thus, if (or should I say when) supply does increase, we will be back at square one waiting for vendors to realise they need to drop their price if they want to sell," he said.

If you are wondering why someone in charge of a portal would be so bearish on the market, it is because Zungalow says a down market makes no difference to people wanting to sell their house, because they save as much buying their new property as they lose on the sale of their old one.

The Bizzaro World of the UK Housing Market

2009-10-20T20:29:44+00:00

The bizarre world of the UK housing market continues to unfold more like a suspense novel than a market supposedly balanced by the pull of supply vs demand.

The Rightmove index has shown that asking prices in London are currently higher than they were at the peak in 2007, which means higher than they have ever been before, a new record after climbing 6.5% in the space of less than a month. Asking prices apparently rose 2.5% across the nation.

There are a lot of reasons being bandied about as to why this has happened, including:

The massive bonuses being talked about in the news after Goldman Sachs announced a $3.03 billion profit for the third quarter and RBS have been found to have £1.8bn put aside for staff bonuses. (for London)
Sellers are attempting to "cash-out", to sell up while times are good and get the best price possible
Estate agents having to inflate asking prices to win the precious few instructions on the go

Richard McKay, director of private property sales portal Zungalow.com believes it is likely a combination of more than 1 reason.

"I think there is definitely a little bit of opportunism at the moment, people have been hearing about the low supply pushing up prices for some months now and they think: if no one else is catching on we might as well give it a go. Then there are definitely agents out there, who, struggling for survival in a market with very few sellers are offering the world to those who consider it," he said.

"The whacky thing is, supply in London is so short on the top end properties that they may end up getting the asking price. Let's try to picture the headlines after London house prices rise 5% in October, no, in fact let's not," McKay added.

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UK House Prices Still Rising According to Government Index

2009-10-14T15:40:14+00:00

UK house prices rose again in August according to the latest release of the government index ran by the Department for Communities and Local Government.

The DCLG index, which is based on mortgage completions in August recorded a 0.5% increase in house prices on the previous month, though prices are still over 5% lower than August last year the report says.

Perhaps most interestingly the quarterly index showed a 2.7% increase in house prices in the 3 months ending August. This is in contrast to the 1.7% fall in house prices in the three months ending May.

The DCLG index mirrors all the major indices, with the exception of the Land Registry index, which is based on completed sales and showed a 0.1% contraction in house prices in England and Wales in August.

The Land Registry index is still the most accurate, but unfortunately it is extremely lagged behind the other indices, and unfortunately it only covers England and Wales; Scottish housing market is performing much better and this could account for the rises in the other indices, according to Richard McKay director of private property sales portal Zungalow.com.

"Scottish house prices are currently only 0.8% lower than last year according to the DCG index. Scottish house prices have never fallen as fast, and they didn't fall as far as the rest of the UK. Thus, the DCLG index including Scotland in its overall index could well be influencing the rise, as it could in all the other indices except that of the Financial Times," he said.

It will be very interesting to see what the next release of the Land Registry index shows on the 28th of this month. If it shows another fall then it looks even more likely that it is Scotland's inclusion in the other indices that is propping up prices, as well as gains fuelled by short supply in the south of England.

Why are Kuwaitis Leading the Way in British Property Investment?

2009-10-10T18:07:34+00:00

A Kuwaiti delegation consisting of Minister of Finance Mustafa Al-Shamali, Director of taxes and planning Hamed Al-Nasser, international agreements inspector Abdulaziz Al-Sallal, Chief of investment agreements Ali Al-Muteirif, and the Director of Al-Shamali's office Khalid Al-Ruweih.

Finance Minister Al-Shamali has reportedly said: Kuwait's relations with the UK are strong and deeply-rooted, especially in the economic domain, as Kuwait tops the UK's list of real estate investors.

This surprised me at first but, is it really all that surprising or unbelievable that foreign investors in British real estate would be predominantly from Kuwait?

Kuwaiti relations with Great Britain are indeed strong and good, everyone can see the value in prime British property presented by the weak Pound, and oil wealth is about all that was left standing by the crunch.

On top of that: Britain will always have a very special place in the heart of Kuwaitis because of the role we played in liberating them from the invasion by the maniacal Saddam Hussein.

They are probably thankful to America as well but there are two reasons why they are coming to Britain to buy property, and not going to America:

A: An Arab government and/or monarchy lives or dies by the perception of its relationship with the US. Kuwait's wealthy would be targeted for investing money that could end up in Israel's pocket or arsenal

B: When NATO forces liberated Kuwait, then US President Bush senior incited uprisings, the Kurdish rose-up in the North, and the Shiites in the south against Saddam and his Sunni followers on the promise of US support coming across the border on the tail of Saddam's forces from Kuwait. When this support never materialised thousands of Shiites and Kurdish were killed in reprisals

Al-Shamali who arrived in London Wednesday evening told KUNA that he would sign an agreement to further boost cooperation between the Great Britain and Kuwait in the real estate field during his official two-day visit.

Kuwait is aiming at attracting foreign investments by amending some regulations and introducing others to its financial policy, he noted. The state is seeking the "experience and technology that foreign investments would add." Bilateral investment ties were launched back in 1953 with Kuwaiti government investments, he said.

UK House Prices up in September says Halifax, Makes the Future Interesting

2009-10-06T10:10:56+00:00

Well, while I have been proven wrong by the Halifax house price index recording a rise in September, this is made up for by the fact that it makes UK house prices very interesting at the moment and in the near future.

Forecast in a recent article that Halifax would reveal a fall in house prices in September. I said this because the Land Registry recorded a monthly drop in house prices in August, and my belief that this was not a blip but the start of a second dip, I said:

"I will wager now that the Halifax index, when it is released in a few days, will show that house prices have fallen based on mortgage approvals among its customer base, which is predominantly in the north.

"I say this because the Land Registry had shown prices rising in July, as did Nationwide and Halifax, which meant that the rises in the South West fuelled by supply shortages were big enough to swallow up the falls in the north. For the Land Registry now to be showing a fall means that the falls in the north must now be big enough to swallow up the gains in the south west, and so the Halifax index will come out negative."

I was wrong in a big way, but it makes things interesting. People seeing that my assertion was wrong will now be wondering if I am also wrong about the Land Registry fall being a blip. The questions that arise from the current situation going forward are:

Will the Land Registry record price increases in September when it is released in a couple of months
And: if the Land Registry continues to show falling prices, how long can the two lenders continue to show prices rising,

My belief that the Land Registry recording a fall in house prices in August was not a blip, but the start of the second dip we have long warned about is because the price rises have always been based on massive supply shortages meeting nominal growth in demand.

This always left it vulnerable to supply increases which became more likely with every positive month; a: because people were being brought out of negative equity and/or back in a situation where they could conceivably sell up and buy another house, and/or b: the positive market makes more people try and sell anyway, and c: rising unemployment means continued repossessions.

So, when the Land Registry recorded prices falling in August, it logically seemed to indicate that the fragile floor had been removed from underneath UK house prices and all bets were off. Richard Mckay, director of Private property sales portal Zuungalow.com thinks that now is a good time to sell for a very novel reason, he said:

"Prices have fallen drastically on UK property there is no question about that. Nor is there any question about the fact that it will likely be 2-5 years before houses regain the value they held in the beginning of 2007.

"However, all houses have fallen in value, so you will save on your next home what you lost on the sale of your old one. But now, if you sell to first time buyers, you can take solace in the fact that, yes, you lost money but you did so voluntarily to help a first time buyer get onto the property ladder."

Calculating the Past to Determine the Future of UK House Prices

2009-10-03T14:57:25+00:00

UK 03 October 2009 - Regular readers on the site will know I wrote several articles earlier this year that analysed the dynamics of UK house prices and affordability since 1957, including a detailed look at the last housing crash, to try and forecast how much farther prices are likely to fall this time.

I used the Nationwide affordability index, which shows the percentage of first time buyers salaries that are being used on mortgage repayments, to show how affordability has a direct affect on house prices. However, I was left hamstrung by the fact that Nationwide's affordability index stopped in the fourth quarter of 2008. So I had to try and forecast for the past before I could forecast for the future.

Read the articles by clicking the links below (perhaps bookmark this, them or both for future reading):

UK House Prices: Learning the Correction Lesson

(Long and Drawn out.

Land Registry UK House Price Decline Slows - Prolonging the Agony(The theory explained more concisely)

More on the Cause of the UK House Price Correction: Lack of Affordability(A different way of looking at it, and my wait for Nationwide to publish up to date affordability figures).

Well, they have finally published the figures for, not only Q1 but Q2 as well. I have been checking regularly, and they must have added both when they added the Q3 house price index. Never mind; now that I have it I can add the figures into my calculation to see how much farther prices have to fall before this correction will end.

As I have linked to the previous articles above, I will simply put the opinion they carried here: Once houses become so expensive that the average mortgage repayment is over 110% of a first time buyers salary, a severe correction becomes necessary. These corrections do not just take us back to the long-term average of about 90%, they take house prices down until mortgage repayments are within 60% of first time buyers salaries.

The Nationwide affordability index shows that the percentage of first time buyer's salaries being spent on mortgage repayments dropped from 105.9% in Q4 2008, to 91.6% in Q1 2009, during which time house prices fell £7,119.00. Unfortunately prices began increasing then, and an increase of £4,357.00 on house prices put the affordability index back up to 93.6% in Q2.

Using the lowest of those two measures: the affordability index decreases by 1% (first time buyers spend 1% less covering their mortgage) for approximately every £2,000.00 that house prices fall. Based on that: for the affordability index to come down the 33% to 60% house prices have to fall a further £66,000 (approx. 40%).

Using the biggest of those measures: the affordability index decreases by 2% for every £1,000 that prices fall. Based on that: further house price falls of £16,500 (approx. 9.7%) would bring the affordability index down to 60%.

As we are using just 2 different figures, the average is the sum of the 2 divided by 2, which is £41,250. I am going to make that my definitive forecast on the UK housing market; that house prices must fall a further 25% from their current level before the correction will end.

You can download all the indexes used to in this article here.

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Nationwide Says UK House Prices Same as Last Year, but Only Way is Down

2009-10-02T19:46:19+00:00

Nationwide released its index for September today and said that house prices rose 0.9% on average in September, bringing prices back to similar levels as they were in 2009. This comes just days after the Land Registry revealed that house prices had fallen 0.1% in August according to its data.

So, does that mean that the Land Registry was just a blip and prices will be rising again in September?

The answer is no. Nationwide has shown prices rising for the last 5 months in a row, and is the only index that shows prices anywhere near the same as they were last year. This is because Nationwide's house price index is based on mortgage approvals, and because Nationwide's customer base is predominantly in the south west where housing supply is at its shortest.

I will wager now that the Halifax index, when it is released in a few days, will show that house prices have fallen based on mortgage approvals among its customer base, which is predominantly in the north.

I say this because the Land Registry had shown prices rising in July, as did Nationwide and Halifax, which meant that the rises in the South West fuelled by supply shortages were big enough to swallow up the falls in the north. For the Land Registry now to be showing a fall means that the falls in the north must now be big enough to swallow up the gains in the south west, and so the Halifax index will come out negative.

Not an exact science I know but you just see if I'm right.

Even Nationwide are realistic about what the price rises mean, Chief housing economist Martin Gahbauer said:

"Given that the housing market still faces considerable headwinds in the form of high unemployment, restrictive credit conditions and an impending withdrawal of the stamp duty holiday, it would be surprising to see house prices continuing to increase at the very strong rate seen in recent months."

Land Registry: House Prices Fell in August, as was Foretold Here

2009-09-28T10:54:57+00:00

Well, I was right. I wrote an article at the tale end of last week, attempting to predict what the Land Registry's house price index, released today, would say.

I predicted that it would show a monthly fall, the first for some time, and what I said would be the first of what would become a second dip in UK house prices. Read the article here.

If you don't read the article, you wil think it was just a lucky guess, but believe me it was based on some science. I would call it an educated guess. Time will tell if I was completely right, and if prices do indeed fall from here on out.

Now, to cover the release itself. According to the Land Registry the average price of a UK house fell by 0.1% in August. The annual rate of decline is still slowing, but as I have said previously, it is logical that the rate of annual decline will start to slow once you get past a year into the crash.

Richard McKay director of UK private property sales portal Zungalow.com shared my beliefs and so he shares the glory of being right. He said in the article: "The economy is still too depressed and transactions too low to justify the positivity we are hearing about at the moment. The price floor is made of wet toilet paper and eventually it is gonna come crashing down. Of course all properties are falling in price, so people can still sell and trade up without being affected. Find out more on our blog."

Like I say, time will tell if this is the beginning of the second dip that myself and so many other analysts have been warning of since prices started rising.

Predictions on UK House Prices

2009-09-25T21:46:49+00:00

The Land Registry index is out on Monday, so I thought I would take a guess at what it is going to say. Before I start, this is not a forecast simply a guess for a bit of fun.

On the last release, which was for July the Land Registry said that, on average UK house prices grew 1.7% between June and July, and were down 11.7% on the year. The Nationwide said that house prices rose 1.3% between June and July, and Halifax said they rose 1.1%. Annually Halifax and Nationwide said house prices were down 12.1% and 6.2% respectively.

Since then the Nationwide and Halifax have released their figures for August, and showed house prices continuing to rise on a monthly and tri-monthly basis. Halifax said that house prices were 10.1% lower in August this year than last year, and Nationwide says house prices are now down just over 2% on an annual basis.

However, it is a well known fact that it is rises in a few areas that are masking the true picture, and that house prices are still falling rapidly in most parts of the UK. To explain, certain areas where there is a drastic shortage of quality houses for sale, have become sellers markets and the rises in these areas are so big that they are cancelling out the falls in other areas and bringing the overall average price of houses up.

The Land Registry index confirms this, house prices are still down by 22% on an annual basis in some areas.

So, what I must decide in order to predict what house prices are going to have done according to the next release of the Land Registry index is:

Will supply have increased sufficiently in those areas enough to slow or stop the growth in prices?

And/or will the rate of decline in the rest of the country have accelerated (or stayed the same if the rises have slowed), so that the rises in the under-supplied areas will not be enough to cancel the falls out.

In my opinion the answer is yes. I think that the Land Registry index in August will show the start of the second dip in UK house prices. I think that the rising foreclosures will either tip the supply balance in the under-supplied areas, and/or cause accelerated declines in the rest of the country. And I think that the continually worsening employment picture will cause the continued depression of prices in all but the under-supplied areas, and that eventually the rises just won't be enough to mask the picture. If it doesn't happen this month it will next month.

Richard Mckay, director of private property sales site Zungalow.com shares my view.

"The economy is still too depressed and transactions too low to justify the positivity we are hearing about at the moment. The price floor is made of wet toilet paper and eventually it is gonna come crashing down. Of course all properties are falling in price, so people can still sell and trade up without being affected, find out more on our blog," he said.

Rightmove Index is Not a Measure of House Prices

2009-09-23T20:09:24+00:00

They're doing it again! Rightmove has issued the figures from its asking price index for September, showing that asking prices are on average 1.5% lower than a year ago, and the press are headlining things like House Prices Down 1.5% Year on Year.

Firstly, the Rightmove index does not measure house prices in the traditional sense of the word, and secondly, the Rightmove index is not even an accurate measurement of asking prices, let alone sale prices.

Okay, I know that almost every property sold in the UK is advertised on Rightmove, and there isn't much -- if any -- competition when it comes to measuring asking prices. But, Rightmove (in my opinion strategically) releases the data on asking prices as they are added to the site, not on its database as a whole.

As Rightmove itself admitted in earlier releases of the index, estate agents are known to suggest an initial asking price at far more than the market will bear (far more than it will sell for in the current market) so that the vendor will go ahead and give them the instruction. Rightmove says that asking prices tend to fall in subsequent weeks and months. At about the same time, I worked out that the average asking price of properties added to Rightmove was 40% higher than the average sale price according to the various indices.

Now there is no mention to the fact the vendors may be putting their property on the market at a price driven by false expectation than realistic saleability. Simply the same old story of short supply driving up prices in the affluent south west, and things still negative in the north because of the depressed mortgage market.

According to Richard McKay, director of private property sales community Zungalow.com, Rightmove's asking prices have always been falsely high because of vendor's unrealistic expectations, but that this is worse now there are signs of recover. He said:

"Asking prices will always tend to give you a skewed picture of the housing market, when times are good people get greedy, and when times are bad people refuse to admit defeat. Now asking prices are getting inflated again because things are starting to look a bit better and seller's are trying to capitalise."

Richard is a frequent commentator on the housing market, famous on Write about Property for saying that you can do just as well out of a downmarket as you can a strong one. You just have to remember that the house you're buying will have fallen in price just as much as the one you are selling.

James Caan Marketing Ploy May Have Small Impact on Housing Market

2009-09-17T11:05:41+00:00

The star of Dragons Den James Caan has launched a new scheme to provide short-term interest free loans to homebuyers, to help them cover fees like solicitors fees and stamp duty.

The £1BN fund for the scheme is being stumped up by Hitachi finance, and people get the loans through selected estate agents who are registered and advertising their properties on the portal look4aproperty.com, which Caan recently bought a stake in.

The scheme is a marketing ploy according to director of private property sales portal Zungalow.com, he said:

"James Caan does not care about stimulating a recovery in the UK housing market. He cares about making money. That is not a criticism; I am simply saying that we shouldn't expect this fund to bring recovery in the housing market, though it will likely do wonders to look4aproperty.com's bottom line."

The loans are undoubtedly a marketing ploy, to get new agents to sign up with look4aproperty and to generate publicity for the company. I was sceptical as to whether or not it would boost the property market, but having given it some further thought, I think it may have a small impact.

I have written previously in response to calls for the government to scrap stamp duty, that a nominal charge of 1-3% would not be an obstacle to people buying property, using the fact that stamp duty was in place throughout the last property boom as proof positive.

But now, when people have to find major deposits to get a decent mortgage, then the extra £1,750 minimum on top of things like solicitors fees may well be a bridge too far during a recession. For that reason the scheme may well have small impact on the property market.

I say small, because the £1billion fund would cover the costs of 333,333 home purchases, if the cost of every one was £3000. Considering the loans go up to £50,000 then it is likely that the fund will cover a lot fewer purchases than that. Hardly enough to stimulate a recovery, but kudos to Caan for generating hype, there is little doubt that it will have the desired effect on Look4aproperty's number of registered agents and therefore revenue.

July House Purchase Loans up 19% on Last Year - CML

2009-09-14T18:10:09+00:00

UK 14 September 2009 - Mortgage lending increased massively in July according to a new survey by the Council of Mortgage Lenders, who revealed the first significant increase in mortgage lending since July 2007.

In July mortgage lending was some 27% higher than in June and 19% higher than in July last year. The figures of the CML survey are backed-up by the July data from the British Bankers Association, which found 76.7% more house purchase loans were approved this year, than last year, and that the value of those loans was 79.1% more this year than last.

However, if you look at the time history series the result isn't as significant as it sounds. According to the historical data, July is typically a high point in the year for house purchase mortgage lending. Yet, lending for house purchases really fell off the proverbial cliff in July 2008.

So now, when lending is just over half what it would be in a July when times are good, is still 76.7% higher than it was in July 2008. It says more about how low lending was in July last year, than it does about it being high this year.

That said, it is definitely a step in the right direction, and would suggest that mortgage finance is getting easier to obtain, as well as the fact that more people are looking for it. The historical data also shows that house purchase mortgage lending has been increasing since February of this year.

The CML survey also found that loans given to first time buyers were 22% higher in July this year, which the Guardian have put down to increased affordability of entry-level homes, which continue to fall in value. This was backed up, said the Guardian by the results of a survey by Findaproperty.com.

Though the fact that house purchase mortgage lending has been rising since February this year, will be viewed as a positive sign by many. I am still sticking to my forecast of 2011 for the UK housing market to bottom properly.

UK House Prices Still Rising According to Halifax

2009-09-12T17:41:39+00:00

UK house prices in 2009 have entered into positive growth territory according to the latest data released by the Halifax.

The lenders index showed that the average UK house price was £112 higher in August this year, than December last year, meaning that the average house price has grown in 2009. Analysts who have forecast that prices will end the year higher than they started it will be rubbing their hands together, whilst nervously waiting to see if we can survive 2009 without any major falls.

While price growth has turned positive for 2009 so far, in the three months ending August last year, house prices were still 10.1% higher than in the same period this year.

On a monthly basis the Halifax recorded a 0,8% increase in August, and a 1.7% increase on the tri-monthly measure, which is less volatile and widely regarded as a more accurate indicator of short term trends.

No one is denying that prices are currently rising. But in my opinion (as my regular readers will know) the rises are fuelled entirely by unrealistic rises in certain areas where slightly increased demand is exposing the massive supply shortfall of quality property for sale.

If it weren't for properties selling at prices near to what they would have done at the peak in these areas, then prices would still be falling, and if supply increases in these areas -- i.e. if rising unemployment or the Bank of England upping interest rates triggers a spate of repo properties -- then prices almost certainly will fall again.

UK House Prices have Bottomed, And Our Survey Said...

2009-09-09T20:56:19+00:00

The UK housing market has bottomed and there will be a slow and steady return to growth as supply gradually increases. That is according to a Reuters' poll of 30 financial analysts at banks, investment firms and consultancies in the UK. The analysts further said that house prices would end this year just a little lower than they started it, with a nominal growth in 2010, and 2.5% growth in 2011.

A similar survey, taken just 3 months ago suggested that house prices would fall 8% this year, and stay flat next year. And that is an example of how reliable these surveys are. I am not questioning the credentials of those surveyed, simply of the anonymous group survey; respondents are under no pressure to get it right.

In my opinion; it is entirely possible that house prices will end this year without falling too much further, but it is inevitable that house prices will endure a period of further falls.

As the last Hometrack report showed, the current price rises are coming from big rises fuelled by short-supply in 11% of the country (mainly in the south west), everywhere else is still falling albeit slower than before. This is because transactions are still at massively low levels and the mortgage market and unemployment situation are preventing this from changing anytime soon.

In my opinion, house prices will not be growing again until at least 2011, but that shouldn't stop people from selling their house to trade up or downsize, says Richard Mckay director of UK property private sales site Zungalow.com, he writes on the company blog:

"The UK is absolutely obsessed by house prices, but it is all much of a much-ness; if you have the right attitude you can do just as well out of the current housing market as you could in 2006.

"There are people who are refusing to sell their houses because they won't get the peak price for it, even if they bought the house years before and could still make a profit at a 30% discount on peak, they are sitting on it, depressing and waiting for better days.

"The fact of the matter is, house prices are relative. That is to say, all houses are falling in value, so by the time you sell up, remortgage and buy the bigger house your family needs, you will end up paying the same amount in mortgage repayments as you would at the peak in 2007."

You can't argue with his logic, if we weren't all as obsessed with house prices and house price growth, we probably wouldn't be in this mess now.

UK Construction Decline Slowing - New Construction Up

2009-09-04T09:37:47+00:00

Construction output in the UK fell by 0.5% in Q2 compared to Q1, according to new data released today by the Office for National Statistics. This was a much smaller fall than the 8% fall recorded in the previous quarter.

Shockingly all new construction was up 1%, while repair and maintenance was down 2% on a quarterly basis. Before people get too excited that the new work has been boosted by increased house building (like I did); all new housing construction fell slightly on the quarter.

You don't have to listen to the radio for long before you hear an advert for one of the main house builders offering incentives including paying deposits on mortgages, help selling existing houses, and even taking them in part-exchange.

The new figures then would seem to suggest that these builders are simply trying to find buyers for their existing stock. They would also seem to suggest that the UK government -- or local councils anyway -- have employed a similar stimulus to France; whereby state contracted work is increased to stave of rising unemployment and recession.

Now is the Time to Sell Your House - C'mon, Quick

2009-09-03T23:28:30+00:00

I have just read an article by Judith Heywood in the Times, well it is not really an article, simply a series of quotes from estate agents and letting agents around the country.

Some being pretty honest and some clearly talking up the market, but the pattern that emerges is of a seller's market in UK housing at the moment. So is it time to sell your house? It is according to Richard Mckay, director of UK property sales portal Zungalow.com.

"If you have a good property in a good area, now is the time to sell, and I mean right now. Short supply is driving up prices and you may even get close to peak value if you can get your property onto the market before supply of like-for-likes increases in your area, before everyone catches on if you like," he said.

The supply shortages really are surprising; as it has never been easier to sell your house, there have never been more options literally at your fingertips. Zungalow.com is a good example actually, it allows you to sell your house privately for £29 per year, compared to the average 2-3,000 charged by estate agents.

UK House Prices Up for First Time in a Year but No Recovery - Hometrack

2009-08-31T21:13:18+00:00

Major UK house price intelligence group Hometrack has today revealed the findings of its latest research into the UK housing market.

The group said that though house prices rose 0.1% in August for the first time in more than a year, the rise is fuelled by short supply pushing up prices in some areas, not a recovery in the wider housing market.

In fact, according to the report, house prices rose in just 11% of the country, mostly in the South. In London house prices rose by 0.3% after months of 2% falls and rising demand. The fact that homes for sale in the capital fell by 5% in August says it all.

Richard Donnell, director of research at Hometrack, said: "Taken at face value these headline results provide further support to talk of the green shoots of recovery, but dig beneath the headlines and the reality is quite different."

"There is a danger that an increasingly severe shortage of housing for sale in a relatively limited number of markets is impacting on prices and the headline performance of the housing market, creating the impression of a national housing market recovery," Mr Donnell said.

The report mentioned the lack of mortgage availability for first time buyers and rising unemployment as obstacles to recovery, but of course, the short-supply itself is also an obstacle to recovery, according to Richard McKay director of UK property sales portal Zungalow.com.

"The shortage of supply driving up prices in some areas is creating false optimism in the housing market, which will prove to be bad news in the long-run. Not least because it is reversing the improvements made to affordability by the correction, leaving a further correction necessary," he said.

UK House Prices Up for 4th Consecutive Month, but Why?

2009-08-27T15:15:57+00:00

UK 27 August 2009 - Nationwide building society, one of the UK's biggest lenders has just released the figures from its UK house price index for August.

According to the report house prices rose for the fourth consecutive month, up by 1.6% on the July figure.

The tri-monthly measure, which is regarded as a more accurate indicator of short-term trends saw prices up by 3.3%, an acceleration on the 2.7% increase recorded for the three months ending July.

And finally the annual rate of decline slowed yet again, now down to 2.7%. Overall prices have risen by 3.2% this year on a seasonally adjusted basis, but are still down 14.4% from the October 2007 peak.

Statements from Nationwide's chief economist Martin Gahbauer made up most of the press release. What he basically said was the low interest rates are behind the upward pressure on prices, the low levels of supply were given one sentence of a 5 paragraph diatribe.

Richard McKay director of UK property sales portal Zungalow.com doesn't buy the interest rates story, he said:

"We must remember that Nationwide is a commercial outfit, which relies on the housing market to make money. Therefore it is in their best interests to create a positive impression," he said.

"The reality is that transaction levels are still sucky, no one with a hefty deposit can get an affordable mortgage, and that is out of the people who have sufficient job security to even want a mortgage in the current climate. The only prop underneath prices is the fact that supply is low and this has meant that buyers have temporarily lost the buyers-market power they had in 2008, if that changes prices will fall again," explained McKay.

I have to say I agree with Richard 100%. While low interest rates will have played their part in the small rises we have seen in transaction levels, those increases in transactions have been too small to have increased prices. Therefore you are left with the shockingly low levels of supply -- worsened by the continued refusal of sellers to realise that they are not gonna get the price their house was valued at in 2007 -- as the main reason for the upward pressure on prices. And how vulnerable that is to increases as the positive data rolls in.

Mortgage Data: First Time Buyers Prevalent in UK Housing Market

2009-08-22T10:04:06+00:00

UK 22 August 2009 - The number of mortgages being approved for house purchases is continuing to increase at a steady rate this year.

The British Bankers Association revealed that the value of house purchase loans was 46.7% higher this June than last June, and .6 Billion Pounds higher than the previous month, the number of loans approved for house purchases was up just over 3000 on the previous month, and 64.7% higher than a year ago. And now the Council of Mortgage Lenders has revealed a further 26% increase in house purchase loans in July.

However, the number of people remortgaging is still falling, according to the BBA the number of people remortgaging in June was 51.8% lower than June last year -- when it was already drastically low -- and there were over 2000 less than the previous month.

This would seem to indicate that there is a high prevalence of first time buyers in the market, compared to those trading up.

This does not indicate a healthy housing market likely to see a sustained recovery according to Richard McKay of Private Sales Property portal Zungalow.com.

"Yes, if the housing market was in normal times then a high prevalence of first time buyers is great, but when all other buyers are practically drying up, leaving us completely reliant on first time buyers, then further price falls are likely just around the corner. Especially when you consider how many of those first time buyers are borrowing off mum and dad to pay the hefty deposits necessary to get decent mortgage deals. Not everyone can afford that, and the number is getting less and less as unemployment soars," he said.

Rightmove August Index: Asking Prices Down 2.2% - Good News for Housing Market

2009-08-18T20:24:33+00:00

UK 18 August 2009 - Oh my god they're doing it again. Rightmove have just revealed its August data on asking prices, and there are literally dozens of articles floating around the web with headlines to the effect: UK house prices suffer biggest fall.

For god's sake; Rightmove is revealing data on the asking prices of properties that are added to the site, that is a million miles away from data on sale prices.

Now, that I have gotten that out of my system I can cover the news.

Rightmove have said that the average asking price of properties added to the site in August was 2.2% lower than in July. That is actually good news, because vendor realism is one of the biggest hindrances to a recovery in the UK housing market.

It is either a well-known fact or a commonly held belief that during a correction house prices will fall until the gap between what buyers are willing to pay and what seller's think their house is worth closes. So, when the Rightmove index was showing asking prices rising earlier this year I quipped that when the Rightmove index began to show prices falling I would think we were getting closer to bottom.

Now, the Rightmove index has shown asking prices falling for the last 2 months, and it does indeed seem that vendor realism is increasing. On top of that mortgage approvals are up and the economy seems to be making the slow beginnings of a recovery, so are we close to a recovery in the housing market?

Unfortunately not. The banks are still under pressure to improve their balance sheets; and to do this by making more profit from fewer loans, which means they are turning as many people away as they possibly can. Also because of this, they are only offering affordable mortgages to people with deposits of 10% and over, with the best deals being attainable only by people with 25% or more to put down.

Then you have rising unemployment, with close to 3million people out of work and millions more in fear for their jobs, none of whom are even considering buying a home.

In short: there are not enough mortgages, but there aren't enough people looking for mortgages for it to matter.

So when will we see recovery? According to Richard McKay, director of FSBO property sales site Zungalow.com, spring/summer 2011 could be the turning point.

"The economy is struggling to cling to the beginnings of a recovery. Even as the economy starts to turn around we are still looking at massive unemployment and job fears right now. It will be well into a clear recovery before these job fears ease sufficiently and some of the newly unemployed manage to get back into work.

"So you are talking about the final 2 quarters of next year for this to start happening. When it does it will be like a black cloud has lifted, and vendor realism will be a lot more prevalent, and I believe the combo will trigger somewhat of a buying and selling frenzy in spring 2011, if not before."

You can read more of Richard McKay's views on the housing market on the Zungalow blog (Zlog).

Private Property Sales Continues to Grow in UK

2009-08-17T12:57:54+00:00

Everyone involved in the property market, if not anyone who owns a house has heard the buzz-acronym FSBO. For Sale by Owner property is -- you guessed it -- property being sold privately by its owner without the use of an estate agent.

FSBO has grown incredibly in the last few years; first from people selling their second homes and investment properties abroad, and since the advent of property crashes around the world, with people selling their own homes privately.

In fact private property sales has become so big in the UK, that the BBC ran a series title Axe the Agent, which caused a massive stir in the media as an agent-supporting portal Property Index slated the BBC.

Undeterred the BBC then followed this with a head-to-head style interview featuring a debate between the interviewer, the director of leading private sales portal the Little House Company Nick Marr, and Richard Hair representing the National Association of Estate Agents.

The overall theme was how private sales offered house sellers the chance to save around £3000 by not having to pay estate agent's fees, a crucial saving in a down market.

The interview was short but it raised a lot of interesting points, including the fact that you can add a clause to an agent's contract so you can avoid paying their fee if you sell privately, and how some of the major UK portals have banned private sales from advertising on their portals, because the estate agents are a larger customer base and so have more sway over the portals.

I managed to get a hold of Nick Marr to see how he thought the interview had gone:

"Well it was a bit short, and we were kind of cut off just as we were getting going, I also felt the presenter was trying to make it more argumentative than I would have liked. But apart from that we were able to raise some important points, and in terms of attention it has generated for Little House it has been excellent," he said.

"Don't get me wrong most people are still selling their UK house using an estate agent, but as FSBO continues to grow and attract media attention for all the right reasons -- namely the amount of money you can save -- more and more people will give private property sales a shot," he added.

UK House Prices Look Like Falling Again

2009-08-14T10:18:19+00:00

Apparently UK house prices are falling again. According to a report in today's financial times the discount taken of properties sold at auction has been rising since May, and properties at auction are now being sold for an average of 18% below their market price.

According to the report auctions are like a snap-indicator of coming price-trends because properties are being sold much faster, and so price adjustments are being made almost in real-time from what sellers are expecting (or hoping for) to what buyers are willing and/or able to pay.

"The increase in the auction discount runs counter to the pervading mood of cautious optimism that the worst may be behind the housing market," said And-rew Brigden, senior economist at Fathom Financial Consulting, which compiles the index of auction prices.

"The widening of the auction discount over the past two months is perhaps the first indication that the nascent housing rebound is already fizzling out."

The auction price index showed that more than 40 per cent of properties sold at auction last month went for a discount of 10-40%. This was a big increase in the dispersion of prices, after about 25 per cent were sold for 10 to 20 per cent discounts the previous month, and may point to increasing uncertainty about the right value for purchases.

"It suggests investors are getting a bit wary," said Mr Brigden.

According to the FT report this supports the opinion that the current stabilisation of prices is based on the drastic shortage of supply which is masking the true nature of the market in which all indicators say prices should still be falling.

Mortgages and House Prices on the Up, Optimism? Afraid Not

2009-08-11T13:15:26+00:00

The Council of Mortgage Lenders has revealed that the number of home purchase loans agreed in June this year was just 6% lower than in June last year. Also today the latest release of the government's house price index shows that house prices rose 1.6% in June, and 2.6% over the second quarter -- this following several monthly rises recorded by the government, Nationwide and Halifax indices this year.

But even CML are cautioning against being too positive about the currently positive data; the report said that the number of mortgages advanced for house purchase was less than half the average seen in June during the past seven years, while loans to first-time buyers remain about half the 30,000-plus taken out each month before the housing market downturn began.

CML economist Paul Samter said: "Low interest rates and realistic selling prices have helped generate a welcome increase in transactions. But there is some way to go before we reach normal levels of activity."

I am afraid that I am one of the big pessimists when it comes to the UK housing market," said Richard McKay of private property sales portal Zungalow.com.

"The banks are still fighting battles with their balance sheets; trying to make more money from fewer loans leaving them unable to provide affordable mortgages, and unemployment is still rising despite positive economic data at present. Until those two things change I can't see any kind of recovery, and don't get me started on affordability," he explained.

UK Housing Market Media in a Frenzy After Positive Forecast

2009-08-10T15:06:57+00:00

London 10 August 2009 - The Centre for Economics and Business Research has whipped the UK housing media up into a frenzy today, when it issued a report saying that house prices would rise 2% next year after ending this year with a further 3% fall and bottoming in the first quarter of next year.

According to the CEBR the growth, fuelled by short supply will then continue in 2011 with a 3.6% rise in house prices.

Meanwhile a report in the Telegraph tells a very different story of a market more vulnerable to a large fall than likely to see a big rise.

"Another financial shock, higher inflation or just higher taxes could take money and confidence away from buyers. Then the price yo-yo could yet spin down further, and for longer," writes George Hay.

According to Richard Mckay of private property sales portal Zungalow.com the housing market will not recover until the economy is in better shape and the banks are more willing to lend.

"Most people don't have the cash to pay the deposits of 25% that you need to get a decent mortgage deal in the current climate. There will not be a recovery until the banks provide more affordable mortgages to those without huge deposits, and that will only happen once they themselves are in better financial shape," he said.

UK House Prices Upward Trend Continues - Halifax

2009-08-06T10:47:08+00:00

UK House prices rose 1.1% on average in July compared to June according to major UK lender the Halifax. This is the second monthly rise in the last 3 months, and the 3rd rise out of the first seven months of this year.

The tri-monthly measure of house prices also turned upward, with the rise of 0.8% being the first such growth since October 2007.

According to the Halifax house prices have now fallen just 0.8% this year so far, and are currently 12.1% lower than they were in the three months ending July last year. The Halifax index is therefore the most likely to show positive house price growth overall for 2009.

The report was also quick to highlight that homes are now just 4.36 times the average UK salary, but further down the report Halifax admits that it measures affordability based on its borrowers. This makes their affordability measure of little use; you cannot measure how affordable homes are using the people who have proven they can afford them.

Richard McKay director of private property sales portal Zungalow.com, and frequent commentator on house prices said:

It is lovely that houses are only just over 4 times the average salary, it's a shame it isn't true in reality. According to the Nationwide affordability index mortgage repayments were still over 100% of he average first time buyers salary in the final quarter of last year. This would have improved slightly in the first quarter of this year, but not sufficiently to end the correction, and now it will be getting worse again, preparing us for another correction."

UK House Prices to Fall Until 2012 - National Housing Federation

2009-08-03T11:04:30+00:00

UK - 03/08/2009 - The National Housing Federation has said that UK house prices will continue falling until 2012. The research, conducted on behalf of the NHF by Oxford Economics led to forecasts of a 12.2% drop this year, followed by a 4.6% fall next year and a 1.1% fall in 2011. However, the report also said that house prices will be 20% higher in 2014 than they are now.

Even some people who have very bearish about the housing market are now back-tracking; because of the strong upward momentum on house prices at present, some are now saying that house prices may end this year higher than they started it. Bears still believe that a second fall is inevitable, but now fear that it may not happen before the end of this year.

I got a call from Richard McKay, director of private property sales site Zungalow.com, to discuss where my views were on the housing market at the moment. I have taken quotes from Richard frequently because of the insightful articles you will find on the company blog (the Zlog).

We talked about the increase in mortgage approvals, mortgage lending (for house purchase) and the decreased forecasts for repossessions, as well as the generally more positive feel and raised confidence currently at play. We managed to come to a conclusion that we were both relatively happy with.

That the Land Registry and DCLG indices would report house price rises in June, July and possibly August at a push, but prices would probably start falling again as the seasonal change combines with the increasing supply fuelled by a rising market to knock the floor out of the current upward push. It all depends whether the rises bring us out of negative annual territory by more than the following falls whether we end 2009 with prices higher or lower.

UK House Price Rise in July Largely Irrelevant

2009-07-31T12:50:44+00:00

The Nationwide index has revealed that UK house prices rose by 1.3% in July. This brought the three monthly measure to a rise of 2.6% up from a 1% increase in the three months ending June -- the biggest three monthly rise since the three months ending June 2007. This also meant that house prices are now just 6.2% lower than they were a year ago.

This has all led to Nationwide predicting that house prices will show a rise on an annual basis by the end of this year, even if prices fail to rise any further on a monthly basis, because of the sharp falls experienced in the second half of last year.

The authors of the report seem to have been very careful in their choice of words and phrases, so as to avoid directly saying that the upward pressure on prices is caused by a shortage of supply.

The biggest surprise though was the report saying that the severe fall in house prices last year was an overshoot and that this current upward swing is the correction of that.

Sure, the drastic liquidity reduction as banks collapsed around the world triggered the current correction, but it was only a catalyst for the reaction that had been building for some time as first time buyers were gradually priced out of the market. Thus the correction won't actually end until homes are more affordable, or the economy recovers whichever comes first.

So the fact that prices are currently going up is largely irrelevant in the grand scheme of things. In the volatile world we currently live anything could happen to prices from now forward. Prices might even continue growing for some time, but if they do then mark my words, there will be another major correction before 2015.

UK House Prices in Steady State for 2009 Says Rightmove, What?

2009-07-20T17:59:59+00:00

The UK housing market has bottomed according to Rightmove, and prices are to remain in "a steady state" for the rest of the year.

Everyone is entitled to their opinion, but it is what that opinion is based on that has me scratching my head:

"This month sees a return to rising average asking prices, albeit up by a more modest 0.6% compared to the more dramatic price rebounds seen in the earlier months of 2009. This follows on from the previous month's slight fall of 0.4%, suggesting we will see the housing market remain in a 'steady state' during the second half of 2009."

So, let me get this straight: simply because we have now had asking prices rising 5 out of 6 months this year, then the bottom of the market was last year.

People, this is asking prices! And not asking prices on the whole, but of properties as they are added to the site. How can we use asking prices of newly marketed properties to forecast what house sold prices will do? In my view we can't. Maybe the Rightmove index would be a better indicator if vendors were being realistic about their asking prices, but according to industry experts they aren't.

Joseph Harwood of Gloucestershire property investment specialists Rock Star said:

"We see it every day, people's abject inability to deal with the reality of the current housing market, and it is getting worse as the property market looks better. A look at Rightmove's own site shows that most of the Gloucestershire properties for sale are being sold at prices far above the current market value."

Richard Mckay of private property sales site Zungalow said:

"I am no one to say that vendors aren't being realistic, as many of our properties are being priced by estate agents and advertised privately by their owners, but what I will say is that the asking prices of new properties coming onto the site are a lot higher on a like for like basis than the properties are being sold."

In my view, and as I have said 100 times before: This correction will continue until the gap between what the majority of vendors are asking and what the majority of buyers are willing to pay in a buyer's market closes. So, until there is the massive increase in transactions that will signal the true market bottom, asking prices rising will only be a sign of lacking vendor realism, which will continue to prevent the market from bottoming.

According to Rightmove the average asking price of new properties being added is £227,864. According to the Land Registry the average price uk houses are selling for is £152,497. Thus the average asking price of new homes being added to Rightmove (which is most houses sold in the UK) is over 30% higher than houses are selling for. Until that gap closes there can be no bottom.

UK House Prices to Stagnate till 2020 - PricewaterhouseCoopers

2009-07-16T21:32:31+00:00

Accountants PricewaterhouseCoopers (PwC) have forecast that it may take a decade for UK house prices to see any real growth; that house prices will remain at 2008 levels until 2020. Further they said that house prices are "more likely than not" to be at 2008 levels in 2015.

John Hawksworth, head of macroeconomics at PricewaterhouseCoopers, said: "Although the estimated average UK house price overvaluation of around 25 per cent in mid-2007 has now been largely eliminated, our analysis suggests that house prices could still have further to fall over the next year.

"Despite some recent reports of rises, we are not out of the woods yet by any means. It is important for buyers to take a long-term rather than a short-term view."

Richard McKay director of private property sales site Zungalow.com disagrees with the report's more controversial statement, but does agree that the recovery will be very slow, he said:

"We agree that house prices have further to fall and that the recovery will be a very slow one. If you look at the last crash, the last of the major falls was in 1993, at which point average mortgage repayments were under 40% of first time buyers average salary, and following 4 years of falls. WE have only had 1 year of falls and mortgage repayments are still averaging 90% of first time buyers' salary.

"Prices will fall until affordability is improved, which includes banks reducing the amount of deposit needed to get a good deal. This means sometime yet, and even when the falls stop the recovery will be slow after such a severe correction."

UK House Prices Falling Slower, Government Figures

2009-07-14T14:03:08+00:00

The UK government has just released the figures for May from its house price index, and they have shown that the rate of decline in UK house prices is continuing to slow, as has been shown by all the major indices for several months now.

According to the government the annual rate of decline slowed from 13.0% in the year ending April, to 12.5% in the year ending May. The tri-monthly index also showed the rate of decline slowing, from 4.8% in the three months ending February, to 0.4% in the three months ending May.

This was only to be expected; all the major indices are showing a slowing rate of UK house price decline, on the back of low supply and marginally increasing demand.

According to the May figures of the British Bankers Association, house purchase loans were still 1.5% lower than in May last year, though this is also slowing; in April house purchase loans were 29.7% lower than a year earlier.

No one can deny that things are currently heading in the right direction (the wrong direction for those who still can't afford to buy), but as it is the low supply levels that are the main driving force behind the price rises, we are very vulnerable to supply increases which could well see price falls accelerate once again.

According to Joseph Harwood director of Gloucestershire property investment firm Rock Star we are very vulnerable to supply increases, but ironically supply increasing in one way, while it will cause prices to fall is necessary for recovery.

"The current supply shortage is worsened by the fact that, of the supply that is available, much of it is not realistically priced. There will be no recovery until all vendors are selling their houses at their current market values, currently some are still asking the same as they would have at the peak in 2007. Gradually vendors are starting to come round, which will increase the levels of saleable supply, and while this may cause prices to fall more quickly again, it will be good in the long run," he said.

Will the Current Stability be the Start of UK House Price Recovery?

2009-07-12T13:39:11+00:00

I just read an interesting article on the blog of private property sales site Zungalow.com, on how the current upward pressure on UK house prices could turn into the beginnings of a recovery -- it blew my mind actually.

The two major indices of the Halifax and Nationwide have reported a 2% increase in house prices since April, (Nationwide 2.1%). Nationwide has been the most positive with its tri-monthly measure having turned positive for the first time since December 2007, when it reported a rise in price in June. But even the Land Registry index as well as that of the government have reported that the rate of decline has slowed massively over the last few months.

As usual I have been advising caution about viewing the current price situation positively, because it is fuelled by only a moderate rise in activity from very low levels, not the major increase you would expect if the market had bottomed, but, couple with the current drastically low stock levels, enough to put upward pressure on prices.

Thus, the current stability and even growth in UK house price has been very vulnerable to an increase in supply, which was being made more likely by the price rises. I had become stuck in a negative rut, and I was absolutely sure that prices would fall again when supply increased, which I believed was inevitable.

The Zungalow post stopped me in my tracks, the writer says: But is the positive news likely to make the holders sell now? When you think about it calmly the answer is no, not really; these people don't want to sell because of the losses they face on their property, the 2% increase barely bites into the 20% loss we have seen so far.

It is true, the slight rise we have seen is unlikely to be enough to bring the sellers out in their droves. I don't agree with the full length of the post however, as it then goes on to say that the positive news may bring buyers out in their droves, pushing up prices, which may then up supply and begin the recovery.

I don't believe this because, the problems, mentioned in the Zungalow post as capable of stunting their scenario, are in my view likely to do so. I believe that the lack of mortgages, spiralling unemployment and the fact that too many vendors are still unrealistic will prevent the upsurge in buyers as laid out in the post.

But this would not only continue the current status quo, with neither supply nor buyers increasing, which is overseeing price growth. Who knows how long short-supply can continue to cause prices to rise, long enough to keep us going until the recovery begins. Not according to Joseph Harwood of Gloucester property investment firm Rock Star, who believes that unrealistic vendors, by worsening the supply shortage could end up worsening the crash, he said:

"People are talking about supply shortages, but if you look on Rightmove you can find hundreds of properties for sale, it's just that none of them are realistically priced. Look at Gloucester on Rightmove, and you will see hundreds of properties, but with the exception of a couple they are still at peak prices. You won't get a recovery until sellers realise this is a severe correction that will not end until prices are actually corrected, which means sellers actually dropping their prices."

He makes a good point, and I think that is why I am abject to view any news positively, or go for the Zungalow scenario; because deep-down I believe this correction is based on the fact that house prices became too over-inflated and first time buyers were priced out of the market. So, as I know that houses still aren't affordable to first time buyers, I know that the correction is not over.

UK House Prices Fell in June - More Falls Inevitable and Necessary

2009-07-08T13:53:25+00:00

UK house prices fell by 0.5% in June on average, according to the latest release of the Halifax house price index. The firm also revealed that the fall in the second quarter of this year, was less than in any since the first quarter of last year.

Halifax said that UK house prices rose by an astonishing 2.4% in May, in the same month Nationwide also recorded a strong rise of 1.2%, however Nationwide said this rise continued by 0.9% in June unlike Halifax.

Halifax housing economist Martin Ellis' comments on the house price data were more of the same, he said:

"There was a 0.5% decline in average UK house prices in June. On a quarterly basis, the 1.9% fall in house prices in the second quarter was the smallest since 2008 quarter one. These figures provide evidence that the underlying pace of house price decline is easing.

As were his comments on sales activity...

"There are further indications of a modest improvement in sales activity, albeit at a very low level. Industry-wide figures show that the number of mortgages approved to finance house purchase increased for the fourth successive month in May. Approvals were at their highest level since April 2008 and 10% higher than a year earlier.

"Improvements in affordability and low interest rates have stimulated housing demand. This, together with a low level of properties available for sale, has helped to stabilise activity and reduce the underlying rate of house price decline in recent months."

"Whilst there have been encouraging recent signs of improvement, the outlook for the UK economy remains uncertain with unemployment set to continue rising for some time. Overall, we expect to see a continuing mixed pattern of monthly house price rises and falls over the remainder of 2009."

On the face of it that sounds a pretty balanced and fair outlook, but even at that; the coming 3 ,months could show it up to have been overly optimistic, according to Joseph Harwood, director of Gloucester property investment firm Rock Star.

"This miniature and minor recovery in UK House prices is almost entirely fuelled by the shortage of housing supply on the sales market. No one can deny that there are thousands of properties in the UK being kept off the market because of price falls. If this current positive data should trigger a large number of these people to begin marketing their property and prices will likely go back into freefall," he said.

And that is certainly the worry throughout the industry, having been voiced by major industries bodies including the Royal Institute of Chartered Surveyors. But at the same time you can't have a healthy housing market, or a housing market recovery on the current levels of stock. So, more stock is needed, which will likely cause prices to fall. So you could say that a further reduction in UK house prices is close to inevitable in order for the recovery to begin. And this tracks with recent reports stating that UK houses still are not affordable for first time buyers

Worst of UK House Price Falls Over - Yeah Right

2009-07-03T11:39:35+00:00

The UK housing market has bottomed out apparently. All the bulls have had their prayers answered; David Miles, a policy maker for the Bank of England has said that he thinks the UK has seen the worst of the house price falls.

Addressing a Treasury Select Committee on his appointment to the interest rate-setting Monetary Policy Committee, Miles said:

"Expectations are crucial in the housing market and they look a bit better now than a few months ago. My hunch -- and I put it no stronger than that -- is that we have seen most of the overall aggregate house price falls."

If I was his boss at the Monetary Policy Committee, I would have sacked him there and then. Anyone who is impartial on the housing market knows that you cannot call what we are seeing now a definitive bottom. The bottom of a market happens when the gap between what sellers are willing to pay closes with what sellers are willing to reduce their price to, and is indicated by a massive upsurge in sales transactions, which then pushes prices up.

There has been no massive upsurge in transactions. The current price stability and even rises are entirely fuelled by the massive supply shortages that we are currently faced with. That makes it very vulnerable to increasing supply which would cause the sharp price drops to begin again.

On top of that property is still not affordable to first time buyers. During the last major correction house prices fell until the average mortgage repayments were under 50% of the average first time buyers' salary. The average mortgage repayment is currently over 90% of the average first time buyers' salary.

Then you have the fact that unemployment is still rising, and that asking prices are still 40% higher than sales prices according to Rightmove's index of asking prices. Vendors are still unrealistic, according to Joseph Harwood, director of Gloucester property investment firm Rock Star.

The current price stability is as a result of low supply. And it is not so much low supply as low supply of realistically priced houses. Certainly in Gloucester most people are still asking far too much for their property. If more people were realistic, and I mean really realistic, we might be able to get the last of the price drops over with and find a real bottom," he said.

There is a possibility that UK house prices may not fall by a great deal from here. If supply remains as low as it is until the economy recovers, but that is highly unlikely.

UK House Price Rise Continues in June - More Agony Prolonging Goodness?

2009-06-30T10:12:14+00:00

The Nationwide has released the figures for its house price index for June. The main points were as follows:

A month on month rise of 0.9% - continuing the trend of monthly rises
Tri-monthly and more accurate short-term measure shows positive growth of 0.9%, the first positive tri-monthly growth since December 2007.
Annual decline hit single digits for first time since July 2008, with the annual rate of decline now at -9.3%

Nationwide admits that prices should still be falling given the low transaction levels we are currently seeing, 55% below the long-term average, and 33% below the lowest point during the last correction in the early nineties. Martin Gahbauer, Nationwide's chief economist said:

"House prices have now risen in three of the last four months, suggesting that the improvement that began to show up in March represents more than just statistical noise. What is unusual about the recent trend reversal, however, is that it has taken place against a background of transactions activity that is still very low by historical standards.

"Although it has risen from the all-time record low reached in November 2008, the industry-wide number of mortgages approved for house purchases is still 55% below its long-run average and 33% below the trough reached in the 1990s downturn. Normally, such a low level of house purchases would be associated with falling house prices."

The truth is that low-supply continues to put a false-floor below prices. As this positive data continues to roll in, one must wonder how long it will be before people start putting their houses back on the market, which will up supply and remove the false floor.

In fact the price rises are actually bad news. As admitted by Nationwide, transactions are low. Transactions are low because homes are still not affordable to first time buyers. Prices need to fall by at least another 15% before they will be sufficiently affordable to first time buyers, so the current situation is only prolonging the downturn. And I will also say, the higher prices rise now, the faster they will fall in the second bite.

Nationwide says that is the current trend of rising prices continues in the second half of the year, then 2009 will register as only a small annual fall in house prices, not the major fall analysts had forecast at the beginning of the year. I will say, that if that happens, then 2010 will be another 2008.

However, it is still possible that this is a seasonal bounce. It all may well change in the winter. Joseph Harwood, director of Gloucester property investment firm Rock Star Investment, thinks that the Nationwide index is barely useful, because it doesn't represent the true market; where many people are still asking far too much for their property.

"Positive news like this, that is not on a stable footing of raised transactions is only going to make things worse and prolong the agony. Sellers still aren't realistic on the whole, and this is only going to make this problem worse," he said.

"On the upside, if this makes people sell up it will reduce stocks on the rental market, thus putting upward pressure on rental rates, which is good news for our investors," he added.

UK House Prices to Stabilise by End of 2009

2009-06-24T16:02:39+00:00

According to a major study into the UK housing market by Standard and Poor, UK house prices are likely to stabilise in the last quarter of this year, while they continue to fall sharply in Spain and Ireland throughout next year.

Their chief economist Jean-Michel Six Since the beginning of the current downturn in mid-2007, price declines have been much steeper than in the 1980s-1990s."

This pointed to two possible outcomes, he said: a fall lasting "four to five years -- and leading to a dramatic cumulative price fall", or a much quicker correction given the speed of price falls so far.

Six also said that because the current downturn happened as a result of bad debt and toxic assets that the countries leveraged more heavily, like the UK and Spain would suffer the most.

Richard McKay of private property sales site Zungalow.com concurs that UK house prices are to stop falling sooner than Europe's other established markets.

"People are beginning to be more realistic about the current state of the UK housing market, in relation to the sale of residential property," he said.

"We have always said that prices would fall until the gap between what sellers were willing to sell for and what buyer's felt they should be paying closed, or at least came close to marrying up. As both sides have started to move toward each other in recent months, we believe prices will end this year on a more stable footing," he explained.

Rightmove Index a Better Measure of Vendor Realism than UK House Prices

2009-06-23T16:37:29+00:00

Oh My God. I have just had a look around the web for news on UK house prices, and found 20 online publications reporting on how UK house prices fell in June. All the reports are based on the only major index to have revealed its figures for June so far, that of major property portal Rightmove.

Rightmove collects information about the asking prices of properties added to the site for sale as they are added. It is an index of ASKING PRICES NOT SALE PRICES. Therefore it cannot be used as an index of UK house prices. In fact it is a better guide as to vendor realism than it is house prices.

Even the author of the report has forgotten the difference between asking prices and selling prices, one of the bullet points reads:

Prices still up 6% in 2009 as equity-rich snap up restricted supply of saleable properties, asking prices having risen this year is not a sign of anything in the sales market, let alone a demographic snapping up properties.

The Rightmove index for June shows the average asking price of people adding properties to the site at £226,436, a shocking 40% higher than the average sale price, which shows that vendors are still unwilling to accept the reality of the current UK housing market.

According to Joseph Harwood of Gloucester property investment firm Rock Star, the problem of vendor realism may be worsening.

"At the moment, we are faced with house purchase mortgages rising, activity rising and house prices seemingly stabilising. The vendors who have been unrealistic in recent months, are now taking their houses off the market, as they think that house prices will start growing again in the near future, and some are even marketing at prices just below the peak, thinking that they can be the ones to restart the growth, it's scary," he said.

Meanwhile, the latest figures from the British Bankers Association show gross mortgage lending still falling, alongside another marginal increase in home purchase loans, similar to what was shown last month and several times in recent months. This is positive news, but with the economy still on a downward trend, unemployment on an upward trend, and vendors unrealistic, UK house prices are still far from being out of the woods.

UK House Prices - Asking Prices Finally Falling

2009-06-20T19:00:48+00:00

Asking prices finally started to fall in June according to FirstRung.co.uk who obviously got their hands of an advance copy of the Rightmove's data for June. Apparently asking prices dropped 0.4% in June, having risen considerably in the figures for April and May.

When the index has shown rises I have said that this indicates that vendors are being unrealistic, and the fall in asking prices backs up one of two things, either:

The vendors who are selling their house are becoming more realistic about their asking price.

A high proportion of the most unrealistic vendors have now admitted defeat and withdrew their property from the market, which is now dominated by realistic sellers.

As FirstRung rightly pointed out, the average asking price according to Rightmove is still about 40% higher than the average sale price according to the Land Registry, meaning vendors still are not being realistic generally.

I actually said in my report into the RM index for May, that when asking prices started to fall according to Rightmove, that is when I would think the market is close to bottoming. But such a nominal fall will need to be followed by falls of a lot more than that before I think the UK housing market is anywhere near bottoming.

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