Let's say you've just found the house of your dreams. You've put in an offer and you've had it accepted. What are the chances of the deal collapsing before you get to exchange?
The answer, according to figures from property conveyancers 1st Property Lawyers, is 29%. That's up dramatically from even 2009, when the equivalent number from the same source was 21%.
Most of the reasons for this are relatively obvious. 15% of the time, the buyers end up dropping out because they can't get the finance they wanted; 7% of the time, the collapse is about a problem in a different part of the home-buying chain. 23% of the time the buyer simply changes his mind. 8% of the time it is about bad surveys (buyers aren't confident enough to both buy houses and to commit to works at the same time). And 1% of the time the buyer is gazumped.
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 the really interesting number in this survey is the top reason for sales falling through: the seller withdraws his property from the market. This is up by four percentage points since 2009 and comes down to the fact that (thanks in part to the demise of expensive 'home information packs') would-be sellers are now able to test the market for free.
They market their properties to see what kind of an inflated price they can get, and drop out at the last minute if they don't get it. This isn't particularly generous behaviour (to buyers or to estate agents) but what it tells us is that many of the sellers out there are only sellers at bubble prices. As long as they can afford not to sell and as long as they think waiting will make them richer they won't actually enter the market. They'll only tease it.
Does this matter? I think so. Why? Because it makes for a dysfunctional market. It tells us that the stand off between buyer and seller is nowhere near over. Buyers still won't (can't) pay the fantasy land prices sellers want. And sellers won't sell if their fantasies aren't fulfilled.
That's a situation that will continue until interest rates rise or mortgage lender forbearance falters (forcing sellers to sell) or the mortgage market returns to its easy lending heyday at the same time as consumer confidence soars.
Back in the 1990s when house prices last crashed, the number of houses for sale rose very fast you could see the excess of supply over demand and know that prices would keep falling. That isn't the case this time. It might look like there are thousands of houses for sale 5,115 houses came on to the market every day last month, says property expert Henry Pryor.
But the numbers from 1st Property Lawyers make it clear that a great many of them aren't really for sale at prevailing market prices. That's why so far it has been inflation rather than large nominal price falls that has begun the hard work of bringing UK house prices back from today's historically nutty levels to something more normal.
But there is still a long way down to go (UK property as a whole remains a good 20% overvalued on historical measures) and if one side ends up having to give, odds are it will be the sellers.
Why? Do you think it more likely over the next five years that the credit market will return to 2007 conditions or that interest rates will rise? Quite.
-
Trump wants to colonise Mars – will it happen?Donald Trump wants to plant the US flag on Mars. Could humans really live there?
-
Klarna postpones US IPO as Trump's tariffs rattle marketsBuy-now-pay-later lender Klarna has postponed its US initial public offering owing to the market turbulence. It is not alone, says Matthew Partridge
-
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.
-
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.
-
This isn’t the stagflationary 1970s – but neither is it the low-rate world of the 2010sOpinion With soaring energy prices and high inflation, it might seem like we’re on a fast track back to the 1970s. We’re not, says Merryn Somerset Webb. But we’re not going back to the 2010s either.
