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Tremble, O Ye Bulls

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Set aside the nonsense about the return of gazumping. Ignore the men and women driving green minis telling homebuyers they’ll have to move fast to snap up the bargain that’s languished unsold since last summer. As far as “signs of stabilisation†go, this is pretty unconvincing. The balance of surveyors reporting house prices drooping further rather than zooming off again is indeed falling, but the proportion is still fairly spectacular.
True, more forward-looking measures are picking up. The RICS survey also contains more definitive signs that the rebound in enquiries underway for the last seven months is now feeding thorough into increased transactions. But the extraordinary jump in two year swap rates - up 50 basis points in the last week - is pushing up bank financing costs. If lenders try to recapture the lost margin, particularly on fixed-rate deals, many borrowers will find it increasingly difficult to make the maths work on purchases of a slice of Britain’s still overvalued housing stock.
Two year futures for the Halifax house price index, which notched up an unexpected, and perhaps one-off, rise last month, no longer suggest a further fall of the order of 20-25 per cent, but merely one of about 10 per cent. But as affordability ratios deteriorate because of higher financing costs, and as rising unemployment increases the supply of property for sale, putative homebuyers have little reason to fear a return of the housing bubble, nor homesellers to expect one. The correction still has further to run.

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