Typically, there is at least one person who has made a ‘killing’ having bought their house at the bottom of the market. And, of course, there are a few who squirm uncomfortably knowing that they are flirting with negative equity.But with the raft of recent data released about the fluctuations of house prices, it will be particularly interesting to eavesdrop on the views aired at dinner parties now.
This time last year there were few people who would have predicted that house price growth would accelerate as quickly as it did over the last year, and that recovery was indeed surprising given the sluggish state of the economy.
So having ‘enjoyed’ a period of house price growth the latest news on house prices isn’t so optimistic.
The 3.6% fall in prices during September reported by Halifax is surprising, but it’s a mistake to read too much into just one month’s figure because when transaction levels are low – as they are currently – and markets are at turning points, the data tends to be particularly volatile.
The more reliable quarterly change comes in at -0.9%, almost identical to the 1% quarterly fall reported by Nationwide. The two indices also report similar year-on-year changes of close to +3%. It is clear that the market is slowing, something that’s to be expected in the current uncertain economic climate.
The key to how much further prices will soften has much to do with the supply side. Certainly, some of the data we have seen recently suggests that supply may be tightening up again but seasonal factors and other uncertainties make the data particularly difficult to read at the moment.
The latest Agency Express Property Activity Index, showed that the number of properties put on the market in September was 10.4% lower than in August and that the three month rolling average was down 4.0%. However, it also reports that there were nearly 40% more houses put up ‘For Sale’ in September this year than in September 2009.
The latest RICS data shows more new sellers in September, but also fewer buyers, which suggests that the market may be tightening again. On top of this, forced sales and new home building are still very low. If these trends carry on they offer some support for house prices, even with low levels of demand and a weak economy. The likelihood would then be only modest falls in house prices rather than a dip on the scale of 2008.
Graham Felstead, head of intermediary channel, NatWest Intermediary Solutions
