There are various estimates of the total number of homes for sale. Estate agents and portals like Rightmove disagree on the total number of unique addresses for sale which I believe to be about 696,000 nationwide. Different numbers exist because the same house being advertised by two different agents is often counted twice and some people count properties that have exchanged contracts. Properties that are “sold subject to contract” are technically still for sale.

The long term average number of new properties added to the market across the UK each month is 174,810.

Last month the number of new properties added to the market was just 48,240

The long term average number of properties sold in the UK each month is 119,000.

Last month the total number of properties sold was just 43,000

Estate agents and bodies like the RiCS have been reporting increased activity in the market this year in what appears to be a triumph of optimism over reality. An increase from one buyer to two can be accurately described as a 100% increase in sales but it is still just two sales!

The winter months often see a reduction in new instructions but January marks a new low in the supply side of the supply:demand ratio. Every month in 2008 represented a 30%+ reduction on the previous year in the number of sales as the Crunch began to bite with the number of sales last month 38.75% down on the same month last year. In January 2007 there were 116,000 sales completed.

In just over a month on April 6th the Government will bring to an end so called “first day marketing” which put an end to the so called ‘grey market’ of homes offered quietly for sale. All properties being marketed will require a full Home Information Pack before they can be offered for sale as opposed to just ordered as is the case now. Despite wide condemnation from across the industry, the exchequer will still raise over £56m in VAT from Hips that nobody uses from homes that never sell.

I was reading in the Guardian in early January about the amount of Stamp Duty revenue that the Government will loose in the down turn and noticed that, as with a similar article in the Telegraph a couple of weeks later, the duty from shares and inheritance tax as well as stocks and shares all seems to be lumped together and the loss is ‘anticipated’ rather than factual.

So, snowed in for the past week, I put the old Amstrad to work taking each sale recorded by the Land Registry and calculating the Stamp Duty that would have been payable. I did this for both the calendar years 2007 and 2008.

Not surprisingly, considering the 53% fall in transaction numbers, the total Stamp Duty take from house sales for Alistair Darling fell but the figures aren’t as bad as the £15bn that had been mentioned.
The actual loss in 2008 for just house purchases was just an eye-watering £2.77bn!

I broke the numbers down by Stamp Duty Band (see above) to illustrate that sales at both the top and bottom of the market seem to have been equally effected although the number of sales at the bottom of the housing ladder seem to have held up better than those that are more expensive although this may just be creative accounting.

But just what does £2.77 bn equate to? When billions are being given to banks it’s easy to loose hold of what a billion pounds actually looks like. here’s what I found;-

It’s about the total amount of the T.v. license fee

or the cost of roughly ten new NHS hospitals

or if size matters, it about the cost of the new aircraft carrier HMS Queen Elizabeth

and perhaps rather topically just now, it just a couple of million more than the Government bail out for car makers

and in case you still can’t get your mind around exactly how big two and a bit billion really is, it is rumored to be the size of Bernie Eccleston’s divorce

A billion here…
Senator Everett Dirksen is famously quoted as saying “A billion here, a billion there and pretty soon you’re talking about real money”. Government spending is rocketing while billions of pounds of tax take has been evaporating and there is little prospect of the situation improving in 2009. 

As an initiative, raising the stamp duty threshold last autumn has proved as impotent as we had warned. However, the wholesale scrapping of Stamp Duty could still make a considerable difference to home buyers who now have to find an extra 10-15% just for a deposit. As lenders have forced up the amount that buyers have to save, those wanting to buy a home for £300,000 have to save an extra £9,000 to pay the Stamp Duty and those spending £500,000 are having to find £20,000 – all out of taxed income. That’s an extra 4% they have to save before they can buy.

Time to scrap stamp duty?
You may recall the Chancellor and Prime Minister scrapping about who would announce the raising of the Stamp Duty threshold last August? At the time, the increase from £125k to £175k was expected to cost the Treasury about £600 million. Well, having done the numbers, in the first quarter (3rd September – 31st December) actually the idea has ‘cost’ just £46m so far! This is a 12 month gesture which I expect will end up costing closer to £280m by the time it ends or is renewed on 2nd September this year and it’s hard to suggest that it has had any impact as prices and transactions have both dived. The exercise has added around 30,000 to the number of homes sold in 2008 that escaped Stamp Duty which would have otherwise brought the fall in numbers for this band up from 38% to 47% and the 1% Duty numbers would have fallen back to around 55%.

Many in the housing industry are beginning to openly question whether the current housing minister, the eighth since Labour came to power and her colleagues in Government really do understand what is really going on in the housing market. I suspect that some will be asking whether it is time for the current administration to step aside and let someone else have a go at fixing the problems that are costing both the Treasury as well as home owners billions of pounds and which I expect will be reflected in close to 100,000 home repossessions this year.

Figures out yesterday from The Halifax suggested that house prices in January were up 1.9% but could the tiny volume of sales now mean that the usual statistics are somehow flawed? How few sales do you need before you can no longer rely on the sample?

In a usual year, around 65 houses sell in each of the 2,000 towns and cities across the UK.

At present just 30 properties are selling with volumes down by over 60% according to the Land Registry December report just out.

The Halifax calculates it’s index based on around 12,000 mortgage offers made each month. This is the equivalent of just 6 homes selling in each town or city!

I’m no statistician and whilst the Halifax House Price Index is always interesting perhaps it becomes less so as the number of homes actually selling shrinks to record lows.

There are around 730,000 individual homes on the market at present (don’t count the same property on with two different agents twice) and I calculate that fewer than 40,000 sold in December. Each estate agency office has around 60 properties on the books but is just selling one a week. One months apparent increase in prices on the previous month may be encouraging but the Halifax survey also confirms their belief that house prices are 17.2% lower than this time last year.

Sellers should not assume that values have returned to their historic levels and for many, the deals that are being done are still around 12% lower than the asking price. This suggests to me that house prices are still falling with many finding that their home will be worth what it was in 2000/2001. For these folk they will have fallen by around 50% from the peak in the summer of 2007.

One of the biggest problems when selling in a falling market is trying to decide how and where to pitch your guide price. Too high and you can easily be mistaken for someone who has been on Mars for the past year. Too low and you spouse will accuse you of giving your kids inheritance away!

The balance between these two extremes is important to appreciate and essential to get right. There are still estate agents who are too scared of loosing an instruction to give objective advice so it’s more important than ever to get more than one opinion. The truth is that the market has fallen over 20% since it’s peak in the summer of 2007. If the smooth young man trying to convince you to give him your business suggest that yours is the only house in the country to have escaped the down turn then congratulations, you’re living in Buckingham Palace.

Marketing.

The asking price of a property is not a stipulation of what you will accept. Gone are the days when agents quoted “Price – £80,000″. These days it’s “offers around” or “offers in the region of”. A guide price is exactly that – a guide. When you are working out with your chosen agent what to quote remember that the guide is just another marketing tool. It’s there to show a potential purchaser that you are serious, that your property fits the profile that he has already got in his mind. When I was an agent, the best reaction I got to a guide price was “yup, I hope I don’t have to pay that much but that feels about right”. What I wanted to do was persuade the applicant that my client was serious about selling, that this house was a fair value and that since it fitted his budget it must be worth him going to see. As I have said, I was NOT saying that this was the price we’d accept.

What you end up selling your property for is never calculated using a formula where ‘x’ is the asking price. The price you achieve is down to negotiation. It depends upon the demand for the property and the alternatives that could be bought for the money. At the end of the day it often depends on how much the buyer ‘wants’ it. I remember pretty girls often saying that actually they don’t get asked to dance that often because men can be put off by their looks. They look expensive! The same is true of houses. Too full a guide price and buyers will walk on buy muttering under their breath how unrealistic the vendor must be.

Low offers.

One of the main concerns – for buyers as well as sellers in a falling market is just where to pitch an offer. Do you assume that the seller has priced ‘unrealistically’ and therefore hit him with a lower offer or if the price is already less than the vendor wanted to quote that low offers will reflect this? The answer is that if you have got an offer then the guide price has done it’s job. You have had at least one viewer and you are now negotiating. The guide price was never supposed to be the price you’d accept and you only sell if you get the deal you want. Equally, no one is going to want to pay over the odds unless you can give him a good reason to do so. Competition, even in this market, provides that kind of reason and if you and your agent have done their job and got lucky then, if you have two buyers you have competition. They aren’t as plentiful as they were 18 months ago but there are still stories of ‘best and final offers’ and of people bidding up prices. 

The latest asking price survey from Primelocation actually suggested that asking prices had risen in December, year-on-year. My instinct was to ask for some of what ever they were smoking but the Hometrack survey that came out last week explained what was going on. Hometrack confirmed that deals that were being done were about 87% of asking price. Buyers and sellers were doing deals having knocked 13% or there abouts off the guide prices that had been quoted. 

So, if you get three agents to come and ‘value’ your house (they actually come to advise you on “asking price” otherwise they would charge your for a valuation that you could rely upon and you could sue them if they were wrong!) and one says £400,000, the next says £380,000 and the third says £350,000 then don’t assume that you need only to consider the first two. The asking price is designed to get people through the front door and in this market, what you think feels about right today may well look expensive in four weeks. Prime London property values fell 3.7% in January alone according to Knight Frank. At this rate you may actually find you can afford Buck House!