I’m credited with being one of the first to call the top of the market in an interview for the Today program in January 2007. Since then regular readers will know that I am not an optimist when it comes to the short term future of the UK housing market. I think there is still much pain for many.
But I’m seeing something at the moment that deserves comment. Like seeing a rainbow, you can’t help nudge the person next to you and nod and say “see that”. Like a hurricane, we may be in the eye of the storm. The winds have died, the sun is shining and you could be forgiven for thinking that the nightmare is over.
Ok, so volumes are just about half what they were a year ago but prices have found a level. There are slightly more buyers than there are sellers although there isn’t a long queue of either. If you want to sell, you ought to be able to find a buyer and if you are looking for a home then you need to be quick on your toes.
Homes are selling across the UK at the rate of about 2,380 a day. This is well below the long term average of 3,745 and way below the frothy days of August 2007 when estate agents were churning 4,645 sales out a every day. In the month we learned about an obscure building society in Newcastle called the Northern Rock there 6,000 new properties coming onto the market every single day to replace the record numbers that were selling.
Today there are just 3,800 new instructions coming onto the market. Buyers have far less choice and sellers can choose pick any one of half a dozen under-worked agents who will prostitute themselves for your business.
Marsh & Parsons registered over 900 new applicants in August according to my friend Peter Rollings. His only problem is that he hasn’t got 900 new homes to sell these people. So, homes that are selling are fetching more than valuers can believe. Buyers are having to tender for the better homes and the dreaded ‘G’ word is making an unwelcome return.
Across the West End in Mayfair the other Peter, Mr Wetherell considers this the perfect market. He shares his Monopoly Board market with Savills and Knight Frank and thinks that the current balance of buyers and sellers is just about as good as it gets. “What we don’t have is volume” he says “and because of that we have too many agents. Some are going to go”.
Two years ago there were over 12,000 agents knocking property out like falling off a log. Money was made, reputations and the image of the industry took a bashing but this was the boom. People made money out of thin air.
For some this was a great market but I wonder if the current balance – not quite enough property to sell and just enough buyers to fight for the few that there are is why those who have been in the business for long enough to be confident that they will be here for some time to come feel that this is actually the perfect market.
Figures out today (from Rightmove.co.uk) confirm that average asking prices of homes for sale have risen to £224,000 but are still 1.5% below the average this time last year. New stock is coming onto the market at a rate of 3,797 per day while the number of homes actually selling is around 2,600 – about 10% more than a year ago but below the long term average of 3,785.
At the same time, the Liberal Democrats have announced an initiative to charge owners of homes worth more than £1m an addition £2,500 pa and those whose properties are worth over £4m an extra £15,000 pa.
The value of the country’s housing stock tripled in the decade that peaked with the boom of 2007 but only about 190,000 homes (out of 21.8m liable for Council Tax) are currently worth more than £1m with half (57k of the 127k) of the highest Council Tax Band H properties over £320,000 currently in London.
The housing market remains extremely fragile. The number of new homes coming onto the market is only just replacing the trickle that are selling. The total volume of stock is now below 700,000 significantly below the six year average of just over a million. This lack of property for sale is helping underpin prices although I expect supply to increase over the next few months. The Gap between asking prices and actual sale prices is still over £63,000 on average.
In it’s most recent report along with the number of Band ‘H’ properties the Communities and local Government department confirmed that nearly 245,000 properties were classed as 2nd homes – a category that might have been expected to be targeted by the Lib Dems whose strongholds have traditionally been in areas such as the South West where the impact of second homes has been debated for years.
Sadly, the Liberal Democrat contribution to the yawning gap in public finances is unlikely to produce much more than £395m a year. The drop in Stamp Duty revenue as a result of the downturn cost the Exchequer £2.7b last year alone. Just 127,000 properties fall into Band ‘H’ at present according to the Valuation Office. This is the band for homes worth more than £320,000 so the Lib Dem plan will have to wait until the huge re-valuation exercise that controversially Rightmove have contributed to has been concluded. A massive task but still something that is more likely to happen before we see a Lib Dem administration who can actually enact an idea like this.
The latest numbers collated by the efficient Essential Information Group show that August in the auction rooms were no better than the traditional ‘private treaty’ market.
A commendable 68% of lots offered for sale actually sold which is slightly up on August last year but the number of lots for sale was a stonking 31.7% lower. This compares with a larger fall in the number of homes that sold in the usual way in what is called a ‘private treaty’ sale. The last 12 months saw 26,537 lots sold down 13.6% on the previous twelve month period.
Sellers expectations appear to have become much more realistic over the past quarter and the lack of supply has had an impact on both prices and on the revenue generated.
Although new repossessions, the staple fodder of auctions fell in the 2nd quarter according to the Financial Services Authority, reports today seem to have missed the number of repossessed properties actually being sold which rose by a whopping 126% on the same quarter (Q2) in 2008 to 15,804. The stock of repossessions at the end of each of these periods increased only slightly from 21,360 to 25,628.
Quite why there has been this huge rise in the number of properties being sold when the number of new properties being repossessed in the first place has risen by just 13% over the same period to 13,610. The Ministry of Justice had been expect to take steps to hold back the tide of repossessed properties being sold but lenders appear to have panicked and unloaded these properties perhaps fearing that their value was going to be further eroded.
It is hard to predict whether the volumes of sales coming to auction is going to increase but two out of three lots selling is a significant improvement on the rates just twelve months ago which were as almost 50:50.
The rate at which houses that are sold are being replaced by new stock seems to be close to 1:1. In July, house were selling at the rate of 2,645 a day across the UK and being replaced by new instructions coming on at the rate of 2,964.
There are always more houses coming onto the market than actually sell. The rate of sales per day has fallen from 4,935 in July 2007 whilst the peak rate of resupply in July was 7,524 in that same year.
The gap was largest in March 2005 when houses were coming onto the market at the rate of over 9,000 a day. They were only selling at around 3,138. In June 2006 estate agents were at their busiest with houses selling at the rate of 5,500 a day.
Today there are about 728,000 individual homes on the market across the country.