An interesting piece on property in the Sunday Times this week. Interesting because it actually concentrated on the thing we keep banging on about here volumes.
The number of new housing loans approved has fallen from 281,000 in the third quarter of 2007 (with a total value of £44.2bn) to a mere 122,000 (£17.9bn) in the third quarter of this year. That's a fall in numbers of 56% and in values of just off 60%. At the same time, the number of high loan to value loans has completely collapsed from about 20% of the bubble total to a negligible part of the new total.
The results are obvious in the transaction numbers. In the boom years, around 1.6 million houses changed hands a year. Now, more like 750,000-800,000 do. There are, as ever, regional variations in the likes of Burnley in Lancashire, volumes are down over 65%; in Islington, they are down only 20%.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But nothing has been immune from this great collapse in transactions: according to Land Registry data, the number of £2m-plus homes sold in March fell from 2,005 the previous year to a mere 124. That's a fall of 40%, and Liam Bailey of Knight Frank tells the Times that the number of transactions in the £2m bracket has fallen by 25% in the last year (although that particular number can probably be almost entirely attributed to the stamp duty changes).
So why aren't people moving? A release from the Nationwide out today attempts to answer the question. 45% of those it surveyed said they weren't moving because of "the state of the economy" or because of the huge costs involved in moving, while another 28% said it was down to "instability of house prices".
However, if you were to delve a little further into those reasons I suspect you would find that "the state of the economy" is code for "can't move or up my mortgage" while "instability of house prices" is code for "no one will pay me what some estate agent told me my house was worth in 2007."
The latter is obvious in the fact that the gap between the average price people are asking for their houses and the average price they are getting (on the rare occasions when they sell) is growing. Even in the face of the obvious (a slow motion crash), sellers won't cut their prices.
Take Scotland. The average asking house price is about £166,000. But the average sales price fell from £157,000 in the three months to last December to more like £148,000 by the end of the first quarter of this year. The 'reality gap' was around £9,000. Now it's about £17,000. The same is true across the UK: according to Rightmove's asking price report, average asking prices hit another record high of just over £246,000 in the month to mid-June.
The Sunday Times article finishes with the story of Ken and Annie Stirk of Stillington, a villagejust north of York. They tried to sell their house in 2008 and failed. Now they are trying again. It isn't going well. "We had two viewings in the first week, then nothing," says Annie, "We have been really shocked that there is no interest. We had thought we were sitting on a nice investment and now it is just disappearing. We can't afford to give it away."
It's hard not to feel for the Stirks. But Annie's going to have to come to grips with one very unpleasant fact: the market doesn't care what she can afford. If she really wants to sell (and the paper says the Stirk's urge to downsize is now "more urgent"), she is going to have to cut her price. And probably by quite a lot (this appears to be the house in question). There's more on house prices in this week's magazine out tomorrow for subscribers.
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the marketsOpinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
