Cover of MoneyWeek magazine issue no 498

Netting a bargain

6 August 2010 / Issue 498

The small stocks worth catching


  • Profit from vast oil reserves near Paris
  • Forget Greece – Belgium is Europe's weakest link
  • How I made £25m from headhunting


What killed the property rally?

The great house-price debate is getting exciting again. After Nationwide reported that prices fell by 0.5% in July, Halifax came out and put a spring back in the bulls’ step by saying that prices had in fact risen by 0.6%. But annual growth slid from 6.3% to 4.9%. And prices are essentially flat on the year.

The standard response of the bulls is that there’s nothing to fear. Prices were bound to ‘stabilise’ after the rally we’ve seen. Besides, we’re now in a two-tier market. As David Smith of Carter Jonas put it: “Increased supply is certainly putting downward pressure on prices at the lower end of the market, but at the mid-to-high end, prices remain buoyant… At the lower end of the market, concerns over the economy and difficulties securing mortgage finance are far more material.”

In other words, houses at the cheap end will get cheaper, but not to worry, people with real money can always be relied on to spend it on property. It’s a nice line, convincing even – but it doesn’t match up to the reality. According to Knight Frank, the price of ‘prime’ London property is on the turn too. Their Prime Central London Index showed property prices falling by 0.5% in July – the first such fall since March 2009.

So what killed off the rally?

• Read the full editor’s letter here:
What killed the property rally?