House prices are back to pre-crash levels?

According to the Nationwide house prices are back where they were 12 months ago and the Halifax pretty much agrees. So, if you have ridden the storm and held your nerve, there is nothing to worry about, it’s business as usual – or so they say.

Hands up who thought that they meant that prices were back to their pre-crash levels? Judging by my e-post bag over the past ten days quite a lot of people do and wouldn’t that be just great? Sadly I’m not sure that it is.

The Land Registry, arguably a broader index and one that is based upon actual sales and not just mortgage offers has prices still more than 10% below their level twelve months ago. They recorded the peak of the market, when prices were at their highest nationally as January 2008 at £184,674. Average prices across England & Wales are currently 15% below this.

Interestingly though, both the Halifax and Nationwide recorded the peak a little earlier perhaps illustrating the time lag between the various indices. The Halifax saw average prices top out in August 2007 at £201,000. Prices today by their own measurement are 18% below their peak. 

Estate agents and sellers took a little longer to appreciate that the band were playing the last waltz. Asking prices, recorded by hit the top six months after the lenders recorded their peak and three months after the Land Registry. In April 2008 average asking prices were £242,000, that’s just 7% above where they are today. The unanswered question though is what is the gap between the asking price and sale price of the properties that are actually selling?

This last figure remains of critical importance because the average asking price is taken from the 675,000 properties that are on the market across the UK. Rightmove tells us that this figure was £223k. The problem is that in August only 75,000 homes actually sold. The average price that these 75k sold for was about £160k according to the lenders. Did they really sell for 28% less than they were asking?

Nobody officially publishes the asking price for properties that sell. Nor does anyone inform us what the average discount that those who do buy actually get but looking at the figures I see from across the market it looks like the gap is much narrower. In July, I calculate that the typical buyer paid about 16% below the asking price. It’s too early to know about August and September but what seems likely is that the deals being done in London and the South East are distorting the figures nationally. Demand in these areas is still relatively high and buyers still have resources to pay to get one of the few properties that is for sale. The indices may say that house prices are back up but only 10% of homes on the market found a buyer in August. Those that sold in the south seem to have sold well but the majority didn’t sell at all and there is no index of the price of unsold houses – perhaps because for many it would be too painful to read.