Latest figures from the Land Registry this morning confirm the negative trend reported by Nationwide and Halifax but it is sluggish sales volumes that has estate agents reaching for the Valium.
According to the Land Registry the average price of a home in England & Wales is now £166,769, a 0.2% fall from £167,423 last month, more than the £158,377 recorded in September last year but 9.3% below the peak of £184,674 achieved in January 2008.
However, as with all markets, transaction volumes are vital for reliable conclusions to be drawn and these continue to comply with Newtons laws of gravity. In July 64,411 properties were sold in England & Wales – just 1% more that in July last year.
The market would usually expect around 82,000 sales a month. The number of new buyers registering with estate agents has fallen off lately with many still finding it harder than they had expected to secure finance. However the main problem today is the credibility gap between the price sellers are asking for their homes and what buyers are prepared to pay. These are the classic symptoms of a falling market.
Average asking prices rose 3.1% to £236,849 last month according to the web site Rightmove. At the same time the Halifax recorded a 3.6% fall in sale price leaving a gap of £74,000 between the two. There had been some confusion as to whether sale prices were in fact sliding but the Land Registry report confirms today that the gap between buyers and sellers is as wide as ever.
The market is defined today by an excess of sellers sitting on a paper profit but who will only sell for ‘their’ price. The few sales that are actually happening are often being done at much lower prices and volumes will remain tight until sellers understand that the difference between ‘aspiration’ and ‘actuality’ for many of them is about 20%!
Property sales in UK fall again
BBC News – 22nd October
“To see the number fall from 12 months ago is a worry,” said housing commentator Henry Pryor. “If transaction volumes continue to fall then we will see even …
Don’t expect a smooth ride or a speedy sale
Independent – Laura Howard – 24th October
… agents will eventually come to appreciate is that buyers are now in the driving seat,” says housing commentator and former estate agent Henry Pryor. …
The return of ‘gazundering’ is good for the property market
MoneyWeek (blog) – 19th October
And when they do so, says home search agent Henry Pryor, they put them on at prices around 3% higher than they would have at the beginning of the summer, …
It’s time to be realistic in our house price aspirations
Financial Times – Daniel Thomas – 19th October
… gap between asking prices and sale prices has widened to more than £60000, a third higher than average, according to Henry Pryor, a housing commentator. …
Business Diary: Tesco the film, coming soon?
Independent – 30 Sep 2010
Here’s the take of estate agent Henry Pryor on the confusing data: “A ‘Miliband market’ is how I describe it – folk are unsure what to believe and most …
Property sales in UK fall again, Revenue figures show
Manchester News – 22nd October – Manchester News, Searching for: henry pryor, Property sales in UK fall again, Revenue figures show.
๏ Clouds over the housing market create a perfect storm for first-time buyers – Guardian
๏ House prices to stagnate after ‘illogical’ October rise – Telegraph.
๏ IMF warns of double dip in housing market – Independant
๏ London Luxury-Home Values Fall as Buyers Stay Away – BusinessWeek
Last week the Halifax reported that house prices had fallen 3.6% in September. Today Rightmove says that asking prices rose 3.1%. What is going on?
I have a dream. In it I find the unclaimed Euro-millions ticket, Stevenage Borough win the FA Cup, my pigs win prizes at the Herts show and Patsy Kensit agrees to one last roll of the dice! Sadly, like those optimistic home owners who put their houses up for sale last month there is a deal of difference between what one dreams of and what actually happens. In real life Pat Butcher is a more likely result!
Every October it’s the same thing. People have a good summer and come back to put their house up for sale – most years asking a hefty 3%+ more than those who listed over the summer. The 105,769 properties that Rightmove.co.uk listed last month each typically wanted £7,000 more than the average property had asked the previous month which is crackers.
Aspiration is a fine thing but sadly, as Ms Kensit is no doubt relieved to know, there’s a world of difference between dreams and reality. Of the 105,000 only 9,000 of these optimists will find a buyer in the next month leaving roughly 92% wondering what they should do next. Rightmove’s own numbers suggest that enquires for a property fall by over 50% after the first week so getting the price right in the first place is essential if you want to draw buyers to your property. Appearing cool and aloof may feel good but serious sellers appreciate that you can’t sell something without interested buyers and with fewer buyers around in the first place you need to do everything to attract them – most importantly appearing realistic about your asking price.
Estate agents are partly to blame. Not all are tough enough with their advice and some are prepared to win an over-priced property in the knowledge that eventually the price will come down and that it should then sell.The truth is that at current rates even if you left the property on the market for a year it has less than a 50% chance of selling.
Vendors in London were even greedier with average asking prices rising 5% in the Capital last month. Low levels of supply offer some justification for this but since volumes of new properties are up 34% this argument is now wearing thin.
What sellers and their agents will eventually come to appreciate is that buyers are now in the driving seat. Marketing a property with an over-ambitious guide price just makes you look foolish – particularly when you come to reduce it as 30% of sellers did over the summer. The internet has made the marketplace more transparent and buyers can see for themselves what is really happening. Values of any asset are based on what a they sell for and not what the owner is asking yet agents often hear that so-and-so is asking ‘X’ for his house so mine must be worth ‘Y’. “His isn’t so neither is yours!”
Like those who sit in the middle lane of a motorway, greedy sellers get in the way of others and are an annoyance. The only satisfaction I have is that most are punished in due course for their greed although most could have got more if they’d only been sensible at the start.
My usual summary of the main housing numbers. These are the facts, you decide what they mean.
Q. How far have house prices fallen below their peak?
A. 16% according to the Halifax and 9% according to the Land Registry.
Q. Have sale volumes recovered?
A. They are 21% better than last year but still 24% below the long term average.
Q. Are there more homes for sale than usual?
A. No, the total number of homes for sale is up 36% on August last year and the number coming onto the market every day is also up, by 23%.
Q. What’s the gap between average asking prices and average sale prices?
A. £62,344. The usual gap is £43,675.
Q. How many homes sold for over £1m last month?
A. Nearly twice as many as last year.
Q. When was the peak of the market for house prices?
A. In June 2007 according to the Halifax and January 2008 as far as the Land Registry is concerned. Asking prices peaked three months later in April 2008.
Only 85,000 homes sold across the UK in August. If you have your home on the market then you have just an 8% chance of selling it in October. This month we’ll see just where the spending axe will fall and therefore what the outlook for property may be. The balance of commentators are bearish with Morgan Stanley warning of falls of up to 18% in the next 14 months.
One thing we can be sure of is the negative impact the FSA investigation into mortgage lending could have. Published in July the report revealed a shocking 43% of loans were ‘self-certified’ or so called ‘liar-loans’. The FSA has indicated that it will move to ban these removing roughly 35% of all demand (remember that 30% of all sales are cash deals not reliant on a mortgage) which could decimate estate agency businesses many of which are already suffering from low volumes.”
Low volumes could be the Achilles heel of the housing market. Agents will scuffle for instructions leaning on vendors to drop their prices to attract the attention of the few remaining ‘qualified’ buyers. Distressed or forced sales will form a larger percentage of the fewer total sales which will all be at lower values as buyers assert their authority. These fewer, cheaper transactions will determine the value of the nations remaining 24m properties.