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Moneyweek -incident Of The Dog In The Night

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Another excellent piece in this weeks monyweek :

Sherlock Holmes:"The curious incident of the dog in the night time"

Inspector Gregory:"The dog did nothing in the night time"

Holmes:"That was the curious incident"

I was sharing a beer with an Australian friend of mine last week when he remarked that a great friend of his who worked for Jones Lang LaSalle in Sydney, had told him that while you don’t see it in the statistics yet, the prices of the houses they are managing to shift are down 20% on last year. Even worse, he said, transaction volumes have halved: sometimes less than half the properties at auction are making their reserve price. Overall, he said, houses just aren’t selling...................

According to Nationwide numbers price growth is just slowing – it, they say, now at around 2.6%... The statistics we have right now are based on properties that actually sell, not the huge quantity, perhaps even the majority, that do sell. As Sherlock Holmes noted, sometimes it is the things that don’t happen that are more important than the things that do…............ 

It should be remembered that this seizing up of the property market activity is also a classic harbinger of any property crash. While there are still many (almost all of whom are industry insiders with vested interests) who would have you believe that property prices won’t, indeed can’t, come off, the truth of the matter is that all markets’ main function is what is called “price discovery”. If the market seizes up and volumes collapse, then it is because prices are too high. Not until prices have fallen sufficiently to reinvigorate the market and bring back the volume, can we say houses are at the ‘right price’.

Worryingly, despite the fact tat Sydney’s house prices may have already be down 20% there is little sign of activity being stimulated in the market. I’m not sure that a 20% fall in prices would turn the UK market around either. With the average house price in the UK now £159,000, according to Nationwide, a 20% drop would bring the price down to around £127,000, still 6.5 times after-tax wages”.............

Nationwide and Halifax only report on those houses on the market that are selling, not the vast majority that arn't selling, and why are they not selling ?, because the price is too high. B)

Edited by Riser

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I wasn't aware of Sydney prices being down 20% but I do understand the basic concept.

I think that the market must have taken a sharp turn down in Australia in June. The Commonwealth Bank, one of the major banks here, normally updates its publicly available information on house prices at the end of each month. It's quite useful IMO but they have just stopped updating the data with no explanation. I find it very hard to believe that they would do this if it showed a rise so my guess is that June prices went down in a sufficient number of locations to get the bank worried. Either that or the volume of sales has dropped so low that they have no firm basis from which to compile the statistics. Either way it looks like the bounce is over.

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An interesting observation.

Many commentators have said that Australia leads the UK by six months in the property cycle. If so we could see this big swing in sentiment repeated here after Christmas.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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