Hot on the heels of the Nationwide House Price index released this morning which confirmed that prices were now 16.6% lower than the start of 2008 comes the latest Land Registry statistics. Based on historic deals agreed, in many case last September and October, the Land Registry calculates that house prices in England and Wales are down 13.5% yerar-on-year.
In reality the drop has been much greater with many now looking at 25% falls since the peak of the market in the summer of 2007. On present evidence, I expect values to return to their levels of 2000/01 which for many will mean a fall of nearly 50%.
Bad though these price falls are, it is the drop in transaction volumes that is more worrying. Through 2008 we saw the number of homes selling fall by around 50% on the year before. The Land Registry report today confirms that in October there were 60% fewer completions than there were in October 2007 and in London it was 66%! Sales of homes over £1m in London fell from 360 in October 2007 to just 151 in October 2008.
As sellers come back into the market in the spring, the supply of new instructions will put downward pressure on prices, buyers and sellers will still struggle to establish what a home is worth and the anticipated 75,000 repossession that will hit the market this year may distort prices even further.
Recent surveys that suggested that asking prices have been rising in December seem to be at odds with the experience of estate agents as well as lenders. If true, it would suggest that actual deals are being done at a significant discount to guide prices with the average now at around 85%. Until vendors and their agents understand that the market is still falling much further than they had realised, there will be continued uncertainty at a time when most in the housing market are looking for reassurance.