The Year in numbers

Psst, it looks like you’ve already missed the bottom of the housing market. There are reports that in the rarefied Central London market house prices in some pockets are up 50% on this time last year. Estate agents John D Wood have been quietly keeping track of the prices actually paid in the capital and recording the deals done. Their research shows that on the basis of actual transactions measured when sales exchange contracts, prices are now back above their 2007/8 peaks. As a long term bear you can imagine how this makes me feel.

The survey of 4,000 houses and 5,500 flats in London’s most expensive postcodes shows astonishing house price growth of 51% from the low, bringing them, on average, 3% above their peak in the summer of 2007. Houses in Prime Central London for example peaked in the survey in the winter of 2007/8 at 261 (the base of 100 was in January 2000) and according to Wood’s they ended 2009 at 269.

Across the street agents Winkworth agree. Overseas buyers they say are fuelling the frenzied market in the Capital. The companies chief executive is quoted as saying “After the rapid rebound of property in the second half of 2009 and a good start to 2010, despite the extreme weather, it is clear that there is significant momentum in the market.”

However, not everything in the garden is rosy. As the latest Land Registry report (out on 29th January) confirmed even in London there is a mixed story with prices up 6.% in Richmond-upon-Thames but down 14.5% in Dagenham and Barking.

The same is true across the rest of England and Wales with the classic ripple effect. According to the Land Registry prices in London were up 6.1% over 2009 but they were down 0.9% in the North West and 2.5% in Wales. In fact, in Wales prices were down 2% in December alone so the trend is not encouraging if you move too far from the Capital.

As it’s February I have to obviously start with a review of 2009. The main research has now been published for the month of December so we can take a forensic look back at 2009. As you can see from the table (attached) the biggest changes were the volumes of new properties coming to the market and the numbers that actually sold. There were 26% fewer new homes marketed than in 2008 and 8% fewer sold – that on a 43% fall in sales volumes in 2008. It’s no wonder that it’s not much fun being an estate agent or a mortgage broker. But what hasn’t reduced in any way that we can measure has been demand.

As you may know, I don’t subscribe to house prices being a function of supply and demand – they are a function of the availability (or otherwise) of credit. Our friends at MoneyFacts confirm that the number of residential mortgages (and of Buy-to-let products) is still thinner than sympathy for John Terry and yet prices have stubbornly risen.

Those who do see demand as part of the answer in the question as to what is fuelling prices will point to the fact that saw over 2.2 million unique users (that’s individuals) searching the countries largest property portal in December. Only 100,000 homes were sold in the whole country. Apparent demand in one month alone may have been higher than it was in the boom. Many of these ‘voyeurs’ will have been simply tyre kickers, keen to see what their own home might be worth or like me, checking to see if I am still two parishes away from being able to afford to buy something.

Whatever the answer 2010 is going to be even more interesting. The number of individual homes for sale is around 700,000. The number selling just half what it was in 2006 and 2007 and while there seem to be huge numbers of people interested, money is still hard to get hold of. You need a small fortune to put down even if you can get a mortgage offer and yet I expect interest rates will catch out many later this year. I’ve said it before, the old sages who made fortunes in property in the 70’s, 80’s and 90’s all said that they did so because the bought well (cheap) and not because they sold well (for a lot). We may be too late to have bought well in London but the ripple is moving out so there will be other places where perhaps you can catch the wave. If nothing else, check out the Year in Numbers table and look at the gap between asking prices and average sale prices. If you want to buy then haggle like you life depended on it.