The number of new properties coming onto the market jumped 78% last month compared to the same period last year. In April 121,000 new homes came onto the market compared to just 67,000 in April 2009. The totals for May reported by estate agents are expected to be even bigger as the demise of Home Information Packs removed the perceived cost of putting a property onto the market.

Across the country the number of homes that actually sold is also up on last year with sales across the UK reported by HMRC 24% higher at 78,000. The latest report from the Land Registry to be published on Tuesday morning is expected to confirm that sale prices are still higher than they were 12 months ago although the trend so far this year is actually slightly down.

However it’s the gap between asking prices and sold prices that remains most worrying with an average £68,000 difference between what estate agents want and what they are actually selling for. (Rightmove ave. asking price £237k vv Halifax ave. sale price £168k – see chart 1)

A Great White shark is swimming in the blue waters of the housing market this summer. The emergency Budget on 22nd June is frightening 80% of buyers away. There are plenty of homes for sale but people expect taxes to rise for the majority and most home buyers expect to be included in that majority. The idea of a quick dip when you suspect there to be a feeding shark in the water is off-putting for all but the most foolhardy.

We have seen the number of homes selling every day increase by 500 from last years record lows of just 2,100. (See chart 2). The 24% increase in demand however is not matching the number of new properties coming onto the market which increased by 1,776 a day. This 78% increase in supply shows little sign of a being mopped up by new buyers some of whom are still struggling to come to terms with new lending rules which will leave many unable to move.

As a result of this imbalance we must expect prices to suffer through the remainder of the year. If you’re selling then it is essential to be competitive compared to other homes that your buyer could choose. If you are a genuine buyer with the ability to perform then the market is yours. The shark has scared away most leaving the golden beaches empty and the waters clear and inviting. Don’t be fooled, he’ll be back!

House sales across the UK rose by nearly a quarter in April compared to last year figures published today from HMRC confirm that 78,ooo properties changed hands. This is a slight increase on the seasonally adjusted 74,ooo in March but is below the average of 100,ooo and way below the 133,ooo sold in April 2006.

The coincidence of the last Budget offering no stamp duty for first time buyers spending up to £250,000 gave the market the kick that no doubt Labour had hoped for. But it wasn’t enough. Whilst nationally the numbers are creeping back up there are some significant differences in individual countries. 60,000 sales in England compares to 49,000 last April whilst the 10,000 sold in Scotland in April last year was actually higher than the 7,000 last month. Wales saw sales volumes increase from 2,0000 to 3,000 and Northern Ireland maintained a thousand.

The housing market remains on the critical list despite claims from some estate agents that a recovery is underway. Transaction volumes are still well down on historic averages with the impact of the Election result, concerns over the detailed proposals for Stamp Duty charges for 2nd homes and buy-2-let together and yet another Budget on 22nd June means that things are not likely to improve in the short term.

The swift removal of Home Information Packs may give the market something to celebrate in the short term as the industry harks back to happier times but the woeful absence of any serious change in lending practices means that we may well find that what we have now is ‘the new norm’.

My biggest concern remains one of potential oversupply as more stock comes onto the market through the summer. This is not being matched by more buyers arriving onto the scene and those that do are often delusional. Only one in four homes on the market is selling at present and there are still too many people who think that they can borrow high multiples of income, who view house prices as a one way bet and who refuse to accept that ‘Prudence’, that long-term mistress in Gordon Brown has not been packed off with New Labour. She will be helping Messrs Osborne and Cable draft what is expected to be perhaps the harshest Budget of the last century as the duo try to provide some kind of fix to the Labour legacy. For now the bulk of the housing market remains in Casualty. The patient is breathing normally but remains on a life-support system.

At it’s peak in May 1637 a single tulip bulb sold in Amsterdam for more than ten times the annual income of a skilled craftsman. In what perhaps for many defines an asset bubble, the early 1600’s saw the price of the then most fashionable flower rise to over 4,500 florins. At the time, a skilled craftsman earned about 300 florins a year and so it is today with houses. 

The average age in the Uk is £26,000 and yet in prime Central London prices of £2,000 or even £3,000 per square foot are not considered unusual. Two grand for the spot where your kitchen bin is! In the rarefied, pin-stripped property market of SW3 the market buzzes with talk of sales like One Hyde Park, the sumptuous and much-hyped development at the top of Sloane Street being built by Candy and Candy. Flats where the corner shop is Harrods, horse guards ride past twice a day and where they were reportedly hoping for prices of £4,000 psf. 

House prices in the capital have recovered their losses and passed their 2008 peaks. Demand for the very best property from those who survived the Credit Crunch and from wealthy foreigners has more than kept pace with the meagre supply of homes for the super rich and whilst the number of deals has shrunk to the size of the contents of channel swimmers trunks they are now most definitely ‘on the turn’.

In 2009 there were just a dozen deals done in central London over £10m. In the first quarter of this year that number has already been overtaken and in Belgrave Square the most expensive house in Britain has I understand, just been sold – for over £60m.

A lovely flat in Grosvenor Square, the sort that would have appealed perhaps to either a domestic or international buyer just a decade ago is now beyond the reach of all but the very wealthiest. As you’d expect for a home on the best square on the Monopoly Board with reception rooms and bedrooms overlooking the gardens it was snapped up and in April sold by Mayfair property guru Peter Wetherell. His guide price was £7.75m or £3,000 psf.

However, instead of a warm glow all this excess leaves me feeling like the little boy who has spotted the Kings’ wardrobe malfunction. Although everyone is fawning at his feet, they see what they believe they should see rather than the rather unattractive vision of a middle age man that I behold. (Ever wondered why there are no nudes of 50 year old bankers?) I have clients who between them have over £100m to spend on property – most want to buy now and all can afford to do so without having to borrow the huge amounts needed by first time buyers but to my eye the market is over-cooked, buoyed up on bluster and bullshit! House prices I think in Central London are over valued by pretty much any metric you care to consider. 

If you consider ‘yield’ or the return you could expect on your money then you can compare property to other forms of investment and get a handle on relative ‘value’. If you bought a snazzy pad for £1m as you can today from posh Knightsbridge agents W.A. Ellis in say Beauchamp Place then you could expect to let it out for about £650 a week. That’s a return or ‘yield’ of less than 4% gross! You could get close to that in a bank and avoid an illiquid asset that has high transaction costs to buy and sell as well as one that can actually fall in value! 

We’ve had twenty five years of rising prices and prime central London has faired well but buyers today justify accepting a miserly 4% yields only because they expect capital appreciation, for prices to continue to rise yet going around 24 of the best agents in Chelsea and Kensington as I did yesterday I couldn’t find one who would go on the record and state that house prices were certain to be higher in 12 months time. 

I accept that there is demand for the very best properties in the Capital and that there are deals being done at these crazy levels and as such, to some this alone confirms their ‘value’. I accept that these are not sales to friends or to other investors and in the case of One Hyde Park that they are being done at over £6,000 psf but I don’t think that these give us a steer on real values. These homes are beyond value and I have only just got it!

Despite nearly thirty years in the business I have only really understood properties like One Hyde Park very recently. The Candys are master marketeers and time and again they have carefully and diligently built a product and pitched it to a market that most agents and commentators thought was unreachable. I was one such sceptic. But it’s not about value in the normal sense of the word. These guys sell dreams and aspirations and they have cleverly done to property what designers have done to cloths and advertisers have done to bottled water. They have made some ordinary extra-ordinary and they have convinced other people to buy it! I think I now see that these kind of people and those who work for them peddle dreams. But I’m not in the business of flattering egos – as I often tell my clients when we are discussing an optimistic agents’ asking price “I want to buy their property, I don’t want to make a friend”. 

Those who do buy these über properties inhabit a world where it’s no longer good enough to just have a flat in London – you’re not a member of this exclusive, global club without a base here. “Something at One Hyde Park, I expect?” is the more likely question – to be met  if not with a frown and expressions of concern that perhaps you have had a set back and may no longer be a member of the obscenely rich club. Just as the rich don’t have a Rolex because it tells a better quality of time than a Swatch or drive a Maserati because it gets to Sainsburys any more efficiently the fabulously wealthy have a pretty blond on their arm and buy these trophy properties because they can and woe betide the flunky who suggests that they may be over-paying or not getting ‘value when they do. 

Central London will continue to attract the very richest because despite our own concerns about our capital to those from eastern Europe and Greece, London remains very safe, very stable, has great schools, a reasonable climate, where you can buy a dream and is still somewhere you can do business in a currency other than the Euro!

In an article published in The Daily Telegraph this week, (An Englishman’s second home is not a castle) Country Life Editor at large Clive Aslet argues that second home owners deserve a Capital Gains Tax break. I think that there are more alert Conservatives post the General Election who appreciate that the depth of manure we find ourselves in requires the hardest of choices when it comes to trying to recover our position following thirteen years of Labour mismanagement. Clive argues in typically genteel fashion that second home owners were not the people the Prime Minister had in mind in his very first speech on May 11th when he said “those who can should”

As Editor at Large of Country Life, the in-house catalogue for second home owners Clive has been an inspiration to many of us down the years and his contribution to the education of myself and to many others in matters of the heritage of this country and the environment we enjoy is second to none. However, I respectfully suggest that he has misread the new Conservative mood and that with a self-confessed vested interest as the owner of a second home he speaks for what I hope is only a minority now – the Tory old guard who helped the Party loose it’s way in the nineties and made it an electoral embarrassment.

As Clive was kind enough to share with Telegraph readers two years ago when I had naively thought I had mentioned in confidence that I had been in Cornwall stalking mackerel with the then leader of the Opposition (neither of us at the time staying in second homes for the benefit of the tape!) a ‘big tent’ with ‘big ideas’ was what David Cameron wanted to offer having just been elected leader. An attractive and credible vision to the modern if slightly embarrassed instinctive Conservative. Some of my best friends own second properties and I understand that none would welcome a tax on their holiday homes but with over a million waiting on Council lists for a first home, many in the more popular second home areas where Clive may indeed have his ‘bolt hole’ there is little doubt that those “middle-class people who feel they have earned the right to relax in pleasant surroundings” as Clive describes them , people who can afford to buy a second home not only leave a considerable green wellie print in their enthusiasm to bring their civilising influence from SW3 but are people who are also quite capable of contributing more. We won’t fix things with charity, good deeds and cream teas!

The assertion that Central London (where Clive says he has his main residence) isn’t a good enough place to bring up three boys is an unconvincing argument despite my own experiences. Since he is at pains to point out that he and Mrs A would “willingly do without” considering selling their 2nd home to pay school fees “if there were a suitable secondary school nearby” I feel it may be worth pointing out another change in attitude that 21st Century Conservatives in Government now espouse and one that I believe has struck a cord with many people after years of State support –  ’if it’s broke, then pitch in and fix it yourself’!

The Bank of England held their nerve and left base rates once again 0.5%. No great surprise there considering the political paralysis at home and the melt down in Euroland but mortgage lenders seem to have raided the dressing up box and have pulled out the Dick Turpin costume! Either that or they are taking us for fools.

There was a time when the cost of a mortgage was somehow connected to the Bank of England’s base rate and the monthly decision of the Monetary Policy Committee was awaited with baited breath and much anticipation. No longer, lenders have found that there isn’t enough money to be made charging close to half a percent so they have now chosen to ignore base rates entirely and charge what they can get away with.

Mortgage rates are 3.16% or over 7 times base rates.
It’s a scandal. Figures published today from the Council of Mortgage Lenders confirm the average outstanding mortgage rate in March was 3.66%! The ten year average is 5.45% and yet we are reckoned to have the lowest rates for over 200 years. As far as the relationship to Bank Base Rates is concerned, ‘They’re having a laugh’.

The mortgage statistics are quite sobering when you consider the average wage in the UK is just £26,000 a year. The typical first-time buyer mortgage in February was £100,000. The average outstanding rate is lower now than it was a year ago (3.83% but this is small comfort to buyers many of who are being asked for 25% deposits. 

First-time buyers gross income was £33,299 says the CML and their mortgage interest payment formed 13.3% of their income. When you add in the £25k many most are now required to save I think we can see why the number of housing transactions is about half the usual number and what is needed if you want to see more home ownership and higher trading volumes. 

Lenders fear falling house prices.
47% of borrowers chose a fix-rate mortgage in February with 36% opting for a tracker but 62% of existing mortgage holders are on variable rate products. There will be little protection for them when base rates head back up as they surely will. One reason lenders may want borrowers to stump up such big deposits is because they have concerns over the future direction of house prices and are looking to protect their deposits against a fall. Whilst ‘leverage’ or borrowing to buy a property magnifies any gain you make when house prices rise your deposit is the first to go if prices fall. The bank doesn’t want to share in your misfortune.

The average monthly ‘interest-only payment on a 3.38% mortgage of  £110,000 is £325 as against £566 for a repayment product. Neither comes anywhere close to the 0.5% that was re-confirmed again today by the Bank of England. I think that we can now admit that the mortgage rates and base rates are no longer connected and that mortgage rates seem to be more closely aligned with bank bonuses and the profits generated by the banks that these bonuses are calculated upon. 

All the main indices are now out for March, the most recent month for which we have ALL the data. These have been brought together as usual in a table comparing March every year back to 2003 which you can download by clicking on the image above.

The market was still settling into it’s stride following the heavy snows of early January, the end of the last Stamp Duty holiday when the threshold fell to £125,000 but before the impact of the upcoming election had dampened everyones enthusiasm.

The Supply of new properties had increased compared to the previous March by 17% and the number of sales had risen by 28%. However both supply and demand were still well below the long term average with the total number of homes on the market at 733,000 as against a more typical one million.

2,387 homes sold each day across the UK well below the average over the past seven years of 3,654. A 35% fall in business for estate agents and others associated with house sales.

This increase in demand was interpreted by some sellers as a reason to raise asking prices (to £235k) up 6% on the year before. Buyers however were paying an average of just £168k according to the Halifax, only £1,220 more than the rolling average.

If a home is worth what someone will pay for it then vendors seem to be very optimistic at present as this gap between average asking prices and average sale prices is now at £67,000.